1. Preparation of general-purpose financial statements.

2. Evaluation of the performance of a sales department.

3. Develop standards to address a new business set up.

4. Review tax compliance of the business .

5. Evaluate whether a branch of the business complies

with the collection and deposit policy of the company
6. Review whether the financial statements are
presented fairly and in compliance with accounting
standards

7. Report on the spending of government funds

8. Report on the total cost of materials and labor used in

the production

9. Conducting lectures on accounting topics

1. Answer: Financial
2. Answer : Managerial
3. Answer: Accounting Research
4. Answer: Tax Accounting
5. Answer: Auditing (Internal)
6. Answer: Auditing (External)
7. Answer: Government Accounting
8. Answer: Cost Accounting
9. Answer: Accounting Education

Accounting
Managerial
Research

Accounting
Financial
Education
Government Cost
Accounting Accounting

Auditing Auditing
(Internal) (External)

Tax
Accounting
Business – is an organization
that converts inputs or
resources such as material,
labor and overhead into
outputs which is usualy either
goods or services.
 1.Dagohoy’s Law Office
2. Clean ko place mo cleaning
services
3. Stephanie Jule’s Tutorial Services

4. Arvie’s Food Vendor

5. Manila Hotel

6. Gaye’s Roses and Flower

7. Luza’s Wash Your Problem Laundry
Shop

8. Pan de Toledo Bakeshop

9. Balong’s Cut and Face Parlor

10. Cocon’s Fish be with you Fish

Shop
11. Malaque’s Accounting Firm

12. Ivy’s Travel and Tour

3 TYPES OF BUSINESSES
ACCORDING TO ACTIVITIES :
1. Services Business – are firms that
generally use their employees to
provide intangible products or
services to costumers.
2. Merchandising Business – types of
business that buys at wholesale
and later sells at retail.
3. Merchandising Business – types of
business that buys raw materials
and uses them in making a new
product therefore combining raw
materials, labour and expenses into
a product for sale later on.
Operating Cycle – time it takes for a
company to create products, sell
these products and collect cash
payments from costumers.
 TYPES OF BUSINESSES
ACCORDING TO ACTIVITIES :
Juan dela Cruz opened his pet shop business called Petness First Juan dela Cruz opened his pet shop business called Petness First
Petshop. He opened a banck account for his business and Petshop. He opened a banck account for his business and
deposited Php 500,000. The business earned Php 50,000 but he deposited Php 500,000. The business earned Php 50,000 but he
had doubts with the recorded expenses of Php 60,000. He is not had doubts with the recorded expenses of Php 60,000. He is not
sure if he should include the following items as expenses: sure if he should include the following items as expenses:

Salary expense 20,000 Salary expense 20,000

Rents Expense 10,000 Rents Expense 10,000
Utilities expense (at home) 15,000 Utilities expense (at home) 15,000
Utilities expense (at the store) 10,000 Utilities expense (at the store) 10,000
Insurance expense 5,000 Insurance expense 5,000
Withdrawals 10,000 Withdrawals 10,000
 What do you think should not be included as expenses?  What do you think should not be included as expenses?
Explain why. Explain why.

Juan dela Cruz opened his pet shop business called Petness First Juan dela Cruz opened his pet shop business called Petness First
Petshop. He opened a banck account for his business and Petshop. He opened a banck account for his business and
deposited Php 500,000. The business earned Php 50,000 but he deposited Php 500,000. The business earned Php 50,000 but he
had doubts with the recorded expenses of Php 60,000. He is not had doubts with the recorded expenses of Php 60,000. He is not
sure if he should include the following items as expenses: sure if he should include the following items as expenses:

Salary expense 20,000 Salary expense 20,000

Rents Expense 10,000 Rents Expense 10,000
Utilities expense (at home) 15,000 Utilities expense (at home) 15,000
Utilities expense (at the store) 10,000 Utilities expense (at the store) 10,000
Insurance expense 5,000 Insurance expense 5,000
Withdrawals 10,000 Withdrawals 10,000
 What do you think should not be included as expenses?  What do you think should not be included as expenses?
Explain why. Explain why.
ACCOUNTS RECEIVABLE

ACCOUNTS PAYABLE

PREPAID EXPENSE

ACCRUED EXPENSE

DIFFERED INCOME

ACCRUED INCOME
Accrual Accounting: an accounting basis wherein
income is recognize when earned and expenses is
recognized when incurred irrespectively of the
timing of cash receipt of payment.

Cash basis of accounting: opposite of the accrual

basis of accounting recognizes income when cash
is received and recognized expenses when cash is
Matching principle: a concept related to accrual
paid.
accounting which state that expenses should be
recorded in the same period as the related
revenues.
Business entity principle: a business enterprise is
separate and distinct from its owner or investor.

Going concern principle: business is expected to

continue indefinitely.

Monetary unit principle: amount is stated into a

single monetary unit.

Objectivity principle: financial statement must be

presented with supporting evidence.

Cost principle: accounts should be recorded

initially at cost.
Disclosure
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principle: all relevant material and
information should be reported.

conservatism principle: also known as prudence.

In case of doubts, assets and income should not be
overstated while liabilities and expenses should not
be
understated.rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
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Name:______________________________ Score: ________________ Date:_________

I. Direction: Multiple choice. Encircle the letter of the correct answer.

1. The accounting guideline that requires financial statement information to be supported by independent,
unbiased evidence other than someone's belief or opinion is the:
a. Business entity principle
b. Monetary unit principle
c. Going-concern principle
d. Cost principle
e. Objectivity principle
2. The principle that requires every business to be accounted for separately and distinctly from its owner or
owners is known as the:
a. Objectivity principle
b. Business entity principle
c. Going-concern principle
d. Revenue recognition principle
e. Cost principle
3. The 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, is the:
a. Going-concern principle
b. Business entity principle
c. Objectivity principle
d. Cost Principle
e. Monetary unit principle
4. To include the personal assets and transactions of a business's owner in the records and reports of the
business would be in conflict with the:
a. Objectivity principle
b. Realization principle
c. Business entity principle
d. Going-concern principle
e. Revenue recognition principle
5. The objectivity principle:
a. means that information is supported by independent, unbiased evidence
b. means that information can be based on what the preparer thinks is true
c. means that financial statements should contain information that is optimistic
d. means that a business may not re-organize revenue until cash is received
6. Marian Mosely is the owner of Mosely Accounting Services. Which accounting principle requires Marian
to keep her personal financial
information separate from the financial information of Mosely Accounting Services?
a. Monetary unit principle
b. Going-concern principle
c. Cost principle
d. Business entity principle
7. Which of the following accounting principles would require that all goods and services purchased be
recorded at cost?
a. Going-concern principle
b. Continuing-concern principle
c. Cost principle
d. Business entity principle
B. Matching. Match the following words with their definition: Write your answer in the space provided.
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, assets 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.
rrrrrrrrrrrrrrrrrrrrrrrrrr
* Assets are the resources owned
and controlled by the firm.

• Liabilities are obligations of the

firm arising from past events which
are to be settled in the future.
• Equity or Owner’s Equity are the
owner’s claims in the business. It is
the residual interest in the assets
of the enterprise after deducting
all its liabilities.
• Income is the increase in
economic benefits during the
accounting period in the form of
inflows of cash or other assets or
decreases of liabilities that result
in increase in equity. Income
includes revenue and gains.
• Expenses are decreases in
economic benefits during the
accounting period in the form of
outflows of assets or incidences of
liabilities that result in decreases in
equity.
• Current Assets are assets that
can be realized (collected, sold,
used up) one year after year-end
date.
• Non-current Assets are assets
that cannot be realized (collected,
sold, used up) one year after year-
end date.
Activity 2
61
Identify if the account is an asset,
liability, equity, income or expense
and indicate its normal balance.
Account Asset Liabilities Owner's
Equity Income Expense Balance
1. Accounts Receivable
2. Prepaid Rent Expense
3. Advertising Expense
4. Bonds Payable
5. Building
6. Cash
7. De Jesus, Capital
8. De Jesus, Drawing
9. Delivery Truck
10. Interest Payable
11. Inventories
12. Land
13. Mortgage Loans
14. Notes Payable
15. Notes Receivable
16. Office Supplies
17. Prepaid Expense
18. Rent Expense
19. Salaries Expense
20. Salaries Payable
21. Service Fees Income
22. Supplies Expense
23. Computer 25. Utilities Expense
24. Unearned Income
Assets Liabilities
Owner's Equity
Income
Expense
1. July 1 - Paolo Reyes started a delivery service. He invested, PHP800,000 cash and Cars amounting to PHP200,000.
2. July 2 – Reyes borrowed PHP100,000 cash from PNB for use in his business.
3. July 7 – Bought tables and chairs from Orocan and paid PHP45,000 cash
4. July 15 – Various equipment were purchased on account from Fortune for PHP55,000
5. July 18 – Reyes made a cash withdrawal of PHP5,000 for personal use
6. July 20 – The account due to Fortune amounting PHP55,000 was paid in cash
7. July 21 – A customer hired the services of Reyes. Cash of PHP15,000 was received from the customers.
8. July 22 – Cash was paid for the following : gas and oil, PHP500 and car repairs, PHP1,000.
9. July 24 – Another customer hired the services of Reyes and promised to pay PHP16,000 on July 31.
10. July 25 – Paid PHP500 for telephone bill.
11. July 27 – Another customer hired the services of Reyes. A bill was issued to them for PHP20,000, 50% of which was collected
12. July 30 – The customer on July 24 paid 50% of his account in cash.
13. July 31 – Paid PHP10,000 for rental of office space, and salaries of PHP9,000
 1. LABANDERO purchase washing machine on January 18, 2016 for his laundry shop
business. The cost of the equipment is PHP50,000.00. It was estimated to have a useful
life of 4 years. It is estimated that after 4 years and 6 months, the office equipment can
be sold at a scrap value of PHP100.00.
2. On January 10, 2016 he purchase another washing machine amounting 45,000.00. Its
estimated life is 5 years and 3 months with a scrap value of 50.00.
3. Electric Dryer was purchased on January 5, 2016, amounting 50,000.00. After 5 years it is
estimated to have a scrap value of 100.00.
4. They decided to transfer to their new building that they constructed amounted to 1.5
million. Its estimated life is 10 years with a scrap value of 1,000.00.
5. They acquire a delivery van that cost 800,000 by paying 400,000 and promise to pay the
remaining balance for one year. The estimated life of the delivery van is 6 years.
6. On the 8th day of January labandero purchase office worth 5,000. On the 31st of January
they found out the remaining supplies worth 1,500 only, so they decided to buy another
office supplies amounting 3,000.

The company uses the straight line method of depreciation. If the accounting period being
reported by Labandero is for the month ending January 31, 2016.

Required:

1. Annual depreciation expense

2. Semi-Annual depreciation expense
3. Quarterly depreciation expenses
4. Monthly depreciation expense
5. Journal Entry

1. LABANDERO purchase washing machine on January 18, 2016 for his laundry shop
business. The cost of the equipment is PHP50,000.00. It was estimated to have a
useful life of 4 years. It is estimated that after 4 years and 6 months, the office
equipment can be sold at a scrap value of PHP100.00.
2. On January 10, 2016 he purchase another washing machine amounting 45,000.00. Its
estimated life is 5 years and 3 months with a scrap value of 50.00.
3. Electric Dryer was purchased on January 31, 2016, amounting 50,000.00. After 5 years
it is estimated to have a scrap value of 100.00.
4. They decided to transfer to their new building that they constructed amounted to 1.5
million. Its estimated life is 10 years with a scrap value of 1,000.00.
5. They acquire a delivery van that cost 800,000 by paying 400,000 and promise to pay
the remaining balance for one year. The estimated life of the delivery van is 6 years.

The company uses the straight line method of depreciation. If the accounting period being
reported by Labandero is for the month ending January 31, 2016.

Required:

1. Annual depreciation expense

2. Semi-Annual depreciation expense
3. Quarterly depreciation expenses
4. Monthly depreciation expense
5. Adjusted Journal Entry
Pedro Matapang started his Matapang Computer Repairs business on February 14,
2016. The following transactions transpired in February 2016:
1. February 14, 2016 - Pedro Matapang invested PHP500,000 into his Matapang Computer Repair business.
2. February 15, 2016 - Pedro purchased one computer unit from XY Computer Store to be used for his business. He issued check
number 001 amounting to PHP55,000.
3. February 16, 2016 - Pedro hired Juana Magaling, an experienced secretary.
4. February 17, 2016 – Repaired the computer of Jean and collected PHP20,000.
5. February 18, 2016 – Repaired the computer of Mike; however, Mike will pay PHP25,000 only on March 18, 2016.
6. February 19, 2016 – Pedro purchased Office Supplies from MM
Merchandise amounting to PHP10,000 on account. Pedro will pay this on March 30, 2016.
7. February 25, 2016 – Paid the salary of Juana amounting to PHP8,000.
For adjustments:
8. Equipment was estimated to have a useful life of 10 years. It is estimated that after five years, the office equipment can be sold at
a scrap value of PHP5,000. The company uses the straight line method of depreciation.
9. By the end of the month, PHP5,000 worth of these supplies are still unused.
10. 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 PHP50,000 in
full.
11. On February 29, 2016, Matapang received the electric bill for the month of February amounting to PHP4,800. Matapang will pay
this bill on March 2016.
12. On February 28, 2016, Matapang repaired the computer of Pedro for PHP25,000. Pedro was on an outof-town trip so he could
not pay Matapang . He told Matapang that he will pay for their services on March 1, 2016.

Required: a. Journal b. Ledger.C. Unadjusted Trial balance d. Adjustments e. Adjusted trial balance

Pedro Matapang started his Matapang Computer Repairs business on February 14,
2016. The following transactions transpired in February 2016:
1.February 14, 2016 - Pedro Matapang invested PHP500,000 into his Matapang Computer Repair business.
2. February 15, 2016 - Pedro purchased one computer unit from XY Computer Store to be used for his business. He issued check
number 001 amounting to PHP55,000.
3. February 16, 2016 - Pedro hired Juana Magaling, an experienced secretary.
4. February 17, 2016 – Repaired the computer of Jean and collected PHP20,000.
5. February 18, 2016 – Repaired the computer of Mike; however, Mike will pay PHP25,000 only on March 18, 2016.
6. February 19, 2016 – Pedro purchased Office Supplies from MM
Merchandise amounting to PHP10,000 on account. Pedro will pay this on March 30, 2016.
7. February 25, 2016 – Paid the salary of Juana amounting to PHP8,000.
For adjustments:
8. Equipment was estimated to have a useful life of 10 years. It is estimated that after five years, the office equipment can be sold at
a scrap value of PHP5,000. The company uses the straight line method of depreciation.
9. By the end of the month, PHP5,000 worth of these supplies are still unused.
10. 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 PHP50,000 in
full.
11. On February 29, 2016, Matapang received the electric bill for the month of February amounting to PHP4,800. Matapang will pay
this bill on March 2016.
12. On February 28, 2016, Matapang repaired the computer of Pedro for PHP25,000. Pedro was on an outof-town trip so he could
not pay Matapang . He told Matapang that he will pay for their services on March 1, 2016.

Required: a. Journal b. Ledger.C. Unadjusted Trial balance d. Adjustments e. Adjusted trial balance
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