Pamantasan ng Cabuyao

Katapatan Homes Subdivision, Brgy. Banay- Banay, City of Cabuyao, Laguna

FUNDAMENTALS OF ACCOUNTING

ACTIVITY 1

Name: Score:
Course & Section: Date:

PROBLEM I:

Ruth Russell started Russell Industrial Spray Services on April 1, 2015. During April, Russel completed
the following transactions:

a. Invested cash in the business, Php 60,000.

b. Bought a service vehicle form CDO Motors for Php 112,500, paying Php 22,500 in cash, with the
remainder due in thirty days.
c. Bought spray equipment on account from Misamis Farm Supplies, Php 18,000.
d. Paid rent for the month, Php 5,600.
e. Paid cash for insurance on service vehicle for the year, Php 5,760.
f. Received cash for spray services done on a building, Php 21,750.
g. Bought supplies for cash, Php 5,730.
h. Billed customers on account for services performed, Php 4,440.
i. Paid cash for utilities, Php 960.
j. Received bill for gasoline used by the service during the month, Php 3,270.
k. Receipts from cash customers, Php 16,420.
l. Russell withdrew cash for personal use, Php 10,500.
m. Paid salaries to employees, Php 20,400.

Required:

Record the transactions for the month of April 2015 using a financial transaction worksheet. Use the
following accounts: Cash; Accounts Receivable; Supplies; Prepaid Insurance; Spray Equipment; Service
Vehicle; Accounts Payable; and Russell, Capital. If the owner’s equity account is affected by a
transaction, identify it as revenue, expense, investment or withdrawal. Compute the balances of accounts
using T- Accounts.
PROBLEM II:

Multiple Choice:

1. When the rent for the business is paid with a check,

a. Cash is decreased and Accounts Payable is decreased.

b. Cash is decreased and Rent Expense is decreased.
c. Cash is decreased and Rent Expense is increased.
d. Cash is decreased and Rent Income is increased.

2. When an entity receives cash for services performed,

a. An asset is decreased.
b. The owner’s equity is decreased.
c. The owner’s equity is increased.
d. Total assets remain unchanged.

3. When a business entity receives payment before delivering goods, the unearned revenue account
is

a. Credited
b. Debited
c. Debited and Credited
d. None of the above

4. Which is false concerning the rules of debit and credit?

a. The left side of an account is always the debit side and the right side is always the credit side.
b. The word “debit” means to increase and the word “credit” means to decrease.
c. Increases in assets and expenses are debited entries, and increase the liabilities, equality and
revenue are credit entries.
d. The normal balance of any account appears on the side for recording increases.

5. A credit entry decreases the balance of

a. Assets
b. Income
c. Liabilities
d. Owner’s equity

6. The purchase of a service vehicle on account

a. Will decrease asset and decrease liability

b. Will decrease equity
c. Will increase asset and decrease a liability
d. Will increase asset and increase a liability
7. Withdrawals by the proprietor has all of the following effects except

a. Reduction of cash balance

b. Reduction of owner’s equity
c. Reduction of profit for the period
d. Reduction of total assets

8. Which of the following statements is correct?

a. To record a decrease in any given liability account that account must be credited.
b. To record a decrease in capital, the capital account must be credited.
c. To record an increase in any given asset account, that account must be debited.
d. To record an increase in any given liability account that account must be debited.

9. The future economic benefits embodied in an asset may flow to the enterprise in a number of
ways. Which is the exception?

a. An asset may be distributed to the owners of the enterprise.

b. An asset may be exchanged for other assets.
c. As asset may be used singly or in combination with other assets in the production of goods or
services to be sold by the enterprise.
d. An asset may be used to convert an obligation to equity.

10. Recording a single transaction in the double- entry accounting records may

a. Decrease the balance on a liability account by a given amount and decrease the balance on an
asset account by the same amount.
b. Decrease the balance on an asset account by a given amount and increase the balance on a
liability account by the same amount.
c. Increase the balance on an asset account by a given amount and decrease the balance on a
liability account by the same amount.
d. Increase the balance on one asset account by a given amount and increase the balance on
another asset account by the same amount.

11. The purchase of an asset on account will

a. Have no effect on total assets or total liabilities.

b. Increase total assets and decrease owner’s equity.
c. Increase total assets and increase owner’s equity.
d. Increase total assets and increase total liabilities.

12. Expenses can be defined as

a. Decrease in economic benefits during the accounting period in the form of outflows or
depletions of assets or incurrences of liabilities that result in decrease in equity.
b. Decrease in owner’s equity.
c. Increases in owner’s equity.
d. Inflow of assets from delivering or producing goods or rendering services.
 13. Inventories are assets which are

a. Held for sale in the ordinary course of business.

b. In the form of materials or supplies to be consumed in the production process or in the
rendering of services.
c. In the process of production for such sale.
d. All of the above.

14. Obligations which are expected to be liquidated through the use of existing current assets or the
creation of other current liabilities are called

a. Current assets
b. Current liabilities
c. Long- term liabilities
d. Unearned revenue

15. Debits

a. Decrease assets and expenses and increase liabilities, revenue, and owner’s equity.
b. Increase assets and decrease expenses, liabilities, revenue and owner’s equity.
c. Increase assets and expenses and decrease liabilities, revenue and owner’s equity.
d. Increase assets and owner’s equity and decrease liabilities, expenses, and revenue.

PROBLEM III:

Engracio Lucinada, Attorney-at-Law, opened his office on September 1, 2015. The following transactions
were completed during the month:

a. Deposited Php 210,000 in the bank in the name of the business.

b. Bought office equipment on account from Daraga Corp., Php 147,000.
c. Invested his personal law library into the business, Php 57,000.
d. Paid office rent for the month, Php 7,600.
e. Bought office supplies for cash, Php 8,850.
f. Paid the premium for a one- year fire insurance policy on the equipment and the library, Php
1,860.
g. Received professional fees for services rendered, Php 24,600.
h. Received and paid bill for the use of a landline, Php 2,280.
i. Paid salaries of two part- time legal researchers, Php 9,600.
j. Paid car rental expense, Php 2,280.
k. Received professional fees for services rendered, Php 21,200.
l. Paid Daraga Corp. a portion of the amount owed for the acquisition of the office equipment
recorded earlier, Php 15,000.
m. Lucinada withdrew cash for personal use, Php 20,750.
Required:

Record the transactions for the month of September 2015 using a financial transaction worksheet. Use the
following accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Office Equipment;
Professional Library; Accounts Payable; and Lucinida, Capital. If the owner’s equity account is affected
by a transaction, identify it as revenue, expense, investment or withdrawal.

PROBLEM IV:

Presented below is the balance sheet for the Leopoldo Medina Nursing Home:

Leopoldo Medina Nursing Home

Balance Sheet
Dec. 31, 2015

Assets

Cash Php 16,000

Accounts Receivable 165,000
Supplies 21,000
Land 90,000
Nursing Home 350,000
Nursing Equipment 160,000
Total Assets Php 802,000

Liabilities and Owner’s Equity

Liabilities

Notes Payable Php 350,000

Accounts Payable 47,000
Total Liabilities Php 397,000

Owner’s Equity

Medina, Capital Php 405,000

Total Liabilities and Owner’s Equity Php 802,000

During the month of January 2016, the following transactions took place:

January 2 Acquired supplies on account, Php 17,500.

6 Collected Php 82,000 from patients for services provided in 2015.
 10 Acquired nursing equipment on account, Php 35,000.
11 Billed patients Php 167,000 for nursing fees.
12 Paid Php 31,000 on accounts payable.
17 Paid nursing salaries, Php 24,000.
20 Paid utilities expense, Php 9,000.
25 Medina withdrew Php 10,000 from the business.
27 Received a bill from the Ryan Morales Ad Agency for Php 12,500 for advertising
expense incurred during the month.
31 Paid Php 15,000 of the notes payable.

Required:

1. Enter the Dec. 31, 2015 balances in a financial transaction worksheet.

2. Record the transactions for the month of January 2016.