Acctg.

Ed 1 - Financial Accounting & Reporting

Activity No. 1
The Books of Accounts
Instruction for numbers 1-6: Indicate the type of book of account that is most relevant to the
items described below.

Example: A business sells goods on credit.

Answer: Sales journal

Transactions Book of account

1. A business purchase goods on account. Purchase journal
2. A business sells goods on cash basis. Cash receipt journal
3. A business purchases goods in exchange for notes Purchase journal
payable.
4. A business purchases equipment for cash. Cash disbursement journal
5. A business wants to know the total amount that it General ledger
owes to all of its suppliers.
6. A business wants to know how much it owes to each Subsidiary ledger
supplier

Activity No. 2
Normal Balances of Accounts
Instruction for numbers 7-16: In COLUMN A, indicate whether the account is ASSET,
LIABILITY, EQUITY, INCOME or EXPENSE. If the account is a CONTRA or ADJUNCT
account, indicate that as well (e.g., CONTRA ASSET). In COLUMN B, indicate the normal
balance of the account, i.e., DEBIT or CREDIT.

ACCOUNTS COLUMN A COLUMN B

7. Cash ASSET DEBIT
8. Owner’s equity (Capital) EQUITY CREDIT
9. Accounts receivable ASSET DEBIT
10. Prepaid Supplies ASSET DEBIT
11. Accounts payable LIABILITY CREDIT
12. Salaries payable LIABILITY CREDIT
13. Accumulated Depreciation CONTRA ASSET CREDIT
14. Sales INCOME CREDIT
15. Cost of sales EXPENSE DEBIT
16. Depreciation EXPENSE DEBIT

Activity 3
Rules of Debits and Credits
Instruction for numbers 17-20: Indicate how each of the accounts listed below are increased
(i.e., DEBIT or CREDIT).
Acctg. Ed 1 - Financial Accounting & Reporting

ACCOUNTS DEBIT or CREDIT

17. Accounts receivable DEBIT
18. Allowance for bad debts CREDIT
19. Owner’s equity CREDIT
20. Service fees DEBIT
Activity 4
Ending Balance of an Account
21. At the beginning of the period, Addy had a cash balance of P 20,000 and a notes payable
of P15,000. During the period, Addy collected P11,000 accounts receivable, paid P8,000
notes payable, and issued additional notes payable of P5,000 in exchange for cash. How
much are the ending balances of cash and notes payable, respectively?

Beginning Balances Ending Balances

Cash Notes Payable Cash Notes Payable
P 20,000 15,000 20,000 12,000
a 17,000 20,000
b 20,000 12,000
c 28,000 12,000
d 36,000 20,000

Activity No. 5
Identification (Books of Accounts)
Instruction: Indicate the type of book of account that is most relevant to the items described
below.

Example: Sales on cash basis

Answer: Cash receipts journal

Transactions/Descriptions Book of account

1. Sale on account Sales journal
2. Purchases on account Purchase journal
3. Collection of accounts receivable Cash receipt journal
4. Payment of accounts payable Cash disbursement journal
5. Purchases of inventory on cash basis Cash disbursement journal
6. Collection of interest income Cash receipt journal
7. Acquisition of land on cash basis Cash disbursement journal
8. This book of account shows the balances of General ledger
controlling accounts
9. The breakdown of each controlling account is shown Subsidiary ledger
in the book of account
10. It is called the “book of original entries” because Journal
transactions are first recorded here
Acctg. Ed 1 - Financial Accounting & Reporting

Activity No. 6
Identification (Types of Accounts) Instruction:
- In COLUMN A, indicate whether the accounts is ASSET, LIABILITY, CAPITAL(EQUITY),
REVENUE(INCOME) or EXPENSE. If the account is a CONTRA or ADJUNCT account,
indicate that as well. (e.g., CONTRA ASSET).
- In COLUMN B, indicate the normal balance of the account, i.e., DEBIT or CREDIT

ACCOUNTS COLUMN A COLUMN B

1. Notes receivable ASSET DEBIT
2. Salaries expense EXPENSE DEBIT
3. Owner’s Drawings CAPITAL CREDIT
4. Building ASSET DEBIT
5. Service fees EXPENSE DEBIT
6. Advances from customers LIABILITY CREDIT
7. Gains ADJUNCT REVENUE CREDIT
8. Interest expense EXPENSE DEBIT
9. Unearned income LIABILITY CREDIT
10. Equipment ASSET DEBIT
11. Interest receivable ASSET DEBIT
12. Capital (Owner’s equity) CAPITAL CREDIT
13. Equipment ASSET DEBIT
14. Freight-out EXPENSE DEBIT
15. Losses CONTRA REVENUE DEBIT
16. Service fees EXPENSE DEBIT
17. Allowance for bad debts CONTRA ASSET CREDIT
18. Inventory ASSET DEBIT
19. Depreciation EXPENSE DEBIT
20. Utilities payable LIABILITY CREDIT
Acctg. Ed 1 - Financial Accounting & Reporting

Activity No. 7
Identification (Types of Accounts)
Instruction: Indicate how the accounts listed below are increased, i.e., DEBIT or CREDIT

Account Titles Increased by a

1. Cash DEBIT
2. Sales CREDIT
3. Accumulated depreciation CREDIT
4. Depreciation DEBIT
5. Inventory DEBIT
6. Owner’s capital CREDIT
7. Rent expense DEBIT
8. Rent income CREDIT
9. Interest receivable DEBIT
10. Interest expense DEBIT
11. Prepaid rent DEBIT
12. Owner’s drawings CREDIT
13. Accounts payable CREDIT
14. Unearned income CREDIT
15. Cost of sales DEBIT
16. Equipment DEBIT
17. Notes payable CREDIT
18. Insurance expense DEBIT
19. Prepaid insurance CREDIT
20. Gains CREDIT
21. Notes Receivable CREDIT
22. Land DEBIT
23. Building DEBIT
24. Furniture and fixtures DEBIT
25. Freight out CREDIT
Acctg. Ed 1 - Financial Accounting & Reporting

Reference:

Millan, Z.V. (2018). Financial Accounting & Reporting (Fundamentals) (2 nd ed.). Baguio City:
Bandolin Enterprise.