Principles of Accounting

M1-Exercise 1

A. Classify the following business as: (A) Service Company, (B) Merchandising Company, and (C)
Manufacturing Company.
A 1. Schools B 11. Grocery
A 2. Computer Shop B 12. Hardware
A 3. Car Assembler A 13. Laundry Shop
A 4. Dental clinic A 14. Medical Clinic
B 5. Department Store A 15. Call Center
C 6. Dress/ Tailoring Shop B 16. Pharmacy
A 7. Driving School A 17. Repair Shop
A 8. Barber Shop B 18. Appliance Store
B 9. Furniture Shop C 19. Shoe factory
B 10. Gift Shop C 20. Textile Mill

M1-Exercise 2

IDENTIFICATION:

1. The gross outflow of economic benefits during the period in the course of regular
activities when said outflows result in decline in equity other than those relating to
distribution to owners. EXPENSES

2. The area of accounting that focuses on developing and reporting financial information
intended for the external users. FINANCIAL ACCOUNTING

3. Any medium exchange that a bank will accept at face value. It includes coins and
currencies, checks, money orders and bank drafts. CASH

4. This involves the independent examination of financial statements for the purpose of
expressing an opinion on the fairness of the said statements prepared by the company
under review. AUDITING

5. An organization in which basic resources are assembled and processed to provide goods
or services to customers or clients. BUSINESS

6. These are goods on hand and are available for sale. MERCHANDISE INVENTORY

7. He wrote a book entitled Summa de Arithmetica, Geometrica, Proportioni et

8. It is the residual interest in the assets of the business after deducting all its liabilities.
EQUITY

9. These are the resources controlled by the enterprise resulting from the past transactions
and events, and from which future economic benefits are expected to pour into the
enterprise. ASSETS

10. These are expenses paid for by the business in advance. PREPAID EXPENSES
 11. The end of the accounting process. FINANCIAL STATEMENTS

12. The area of the accounting that is focused on the accumulation and preparation of
financial reports for the use of management. MANEGERIAL ACCOUNTING

13. These are long term debts secured by a collateral. MORTGAGE PAYABLE

14. The revenue account commonly used by merchandising companies. SALES REVENUE

15. These are revenues collected in advance by the business. UNEARNED REVENUES

16. This is included as one of the basic financial statements that companies need to prepare
in order to make the financial statements more useful and meaningful to those who might
have an interest in the business. Notes to the Financial Statements

17. These are claims against debtors or customers arising from the services rendered on
account and sale of merchandise on account. ACCOUNTS RECEIVABLES

18. The statement showing the sources of cash that came into the company as well as the
users or disbursements for which the cash went to. STATEMENT OF CASH FLOW

19. The user of financial information that decides whether they should buy, hold or sell their
shares of stocks. ANALYST

20. An association of two or more persons who bind themselves to contribute money,
property or industry to a common fund, with the intention of dividing the profits among
themselves. PARTNERSHIP

21. These are financial statements prepared for period or less than one year, the purpose for
which is for internal use of the business. Interim of Financial Statements

22. It shows the financial position or condition or condition of an enterprise as of a particular

23. The kind of business that buys goods or commodities then sells the same at a profit.
MERCHANDISING BUSINESS OR TRADING

24. The summary of changes in the owner’s equity that have occurred during a specific
period of time, such as a month or a year. Statement of Changes in Owner’s Equity

25. A service activity. Its function is to provide quantitative information, primarily financial in
nature, about economic entities. ACCOUNTING

26. These are the rules; procedures, practice and standards followed in the accumulation,
preparation, preparation and presentation of accounting data. GAAP OR GENERALLY
ACCEPTED ACCOUNTING PRINCIPLE

M-1 Exercise 3
 1. Accounts Payable L
2. Accounts Receivable A
3. Automobile A
4. Advertising Expenses E
5. Bonds Payable L
6. Building A
7. Cash A
8. Commissions Income R
9. Depreciation expense E
10. Equipment A
11. Fees Earned R
12. Franchise A
13. Furniture and Fixtures A
14. E. Dela Cruz, Capital C
15. E. Dela Cruz, Drawing C
16. Interest Expense E
17. Interest Payable L
18. Land A
19. Machineries A
20. Merchandise Inventory A
21. Mortgage payable L
22. Notes payable L
23. Notes receivable A
24. Office supplies A
25. Office supplies expense E
26. Prepaid insurance A
27. Prepaid rent A
28. Professional fees R
29. Rent expense E
30. Rent income R
31. Salaries expense E
32. Salaries payable L
33. Sales R
34. Taxes payable L

M1-Exercise 4

1. K
2. P
3. G
4. H
5. D
6. E
7. A
8. C
9. O
10. M
11. L
12. N
13. J
14. F
15. I