Basic Accounting: (Analyzing Increase assets and increase owner’s

Business Transaction) equity

 Which account increases equity? What types of accounts are interest

receivable and fees receivable?
Revenues
Asset
 It refers to the earnings for work
done or goods delivered to the In 2020, BK company’s assets
company, regardless of when cash is decreased by 30,000, and its
received.
liabilities decreased by 30,000. Its
Revenues owner’s equity therefore is:
 The owner of an entity invest cash Unchanged
on the business. What would be the
effects of this transaction on the
components of the basic accounting The Adjusting Process
period?
The trial balance shows Supplies
Increase assets and Increase owner’s
equity. 1,350 and Supplies expense 0. If 600
Which of the following is not a step of supplies is on hand at the end of
in the accounting process? the period, the adjusting entry is:
Revision
Dr. Supplies Expense 750; Cr.
Which account is considered
temporary? Supplies 750
Withdrawal The trial balance shows Supplies 0
It is the process of keeping a record
and Supplies Expense 150. If 80 of
of all business transactions.
Journalizing supplies is on hand at the end of
This includes money such as bank period, the adjusting entry is:
balance, paper currency, coins, and
Dr. Supplies 80; Cr. Supplies Expense
checks.
Cash 80
Performing services for cash will What are the effects of an
have the following effects on the adjustment for prepaid expenses?
components of the basic accounting Decrease asset and increase
equation. expenses

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 Fabu Company shows the following on hand at the end of the period,
assets in its statement of financial what is the adjusting entry?
position: Prepaid Rent- 5,000; Dr. Supplies 8,000; Cr. Supplies
Unearned Revenue- 350,000; Expense 8,000
Inventory- 200,000; Building The following are the major types
2,000,000; Cash equivalents- (categories) of adjusting entries,
112,000. What is the total current Except:
asset of the company? Recognized Revenue
317,000 It reports the results of the business
operations and shows the revenues
and expenses of a particular period.
Income Statement
Accounting for Merchandising
Business
Under a perpetual inventory system
when goods are purchased for
resale by company:

It is a document accompanying the Purchase on account are debited to

numerical data listed in the Inventory

financial statements. When is physical inventory usually

Notes to the financial statements taken?

What are the adjustments for Physical inventory is usually taken

accrued revenues? when a limited number of goods is

These have an assets-and-revenues- being sold or received, and at the

account relationship end of the company’s fiscal year.

The trial balance shows a debit Which of the following should not

balance on Supplies and supplies be included in the physical

Expense accounts of 0 and 15,000, inventory of a company?

respectively. If 8,000 of supplies are

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 Goods held on consignment from The sales accounts that normally
another company have a debit balance are:
Both sales Discounts and Sales
If net sales are r40,000, cost of good Returns and Allowances normally
sold is 310,000 and operating have a debit balance
expenses are 60,000, the profit is: Partnership
90,000 (Revenue – COGS) Upon the formation of a
Gross profit will result if: partnership, each partner’s initial
Net sales are greater than cost of investments of assets should be
goods sold recorded at their:
If beginning inventory is 60,000, Fair values
cost of goods purchased is 380,000, Ben and Sam formed a partnership.
and ending inventory is 50,000, cost Ben contributed 80,000 and used a
of goods sold is: truck that originally cost 350,000
390,000 (Beginning Inventory + and had accumulated depreciation
Purchases and Other Costs - Ending of 150,000. The trucks fair value
Inventory = Cost of Goods Sold.) was 160,000. Sam, a builder,
Cost of goods available for sale contributed a new storage garage.
consists of two elements: beginning His cost of construction was
inventory and: 400,000. The garage has a fair value
Cost of goods purchased of 550,000. What is the combined
In determining the cost of goods total capital that would be recorded
sold in a periodic system: on the books of the partners?
Freight-in is added to net purchases 79,000 (Total capital (cash) + fair
Which of the following accounts value of truck + fair value of the new
will normally appear in the ledger storage garage)
of a merchandising company that It is a company whereby the owners
uses a perpetual inventory system? are not personally liable for the
Cost of Goods Sold company’s debt or liabilities.

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 Limited liability company share of the total bonus is equal to the total
bonus (P7,500) times Mills’ income ratio
(20%) or P1,500.)
NBC company reported net income
Which of the following statements
of 60,000. If partners N, B and C about partnership financial
have an income ratio of 50%, 30% statements is CORRECT?
and 20%, respectively, C’s share of The owners’ equity statement is called the
the net income is: partners’ capital statement.

12,000 (Partnership income x In the liquidation of a partnership,

it is necessary to (1) distribute cash
partner C’s income ratio (20%))
to the partners, (2) sell noncash
It is an agreement signed by two or assets, (3) allocate any gain or loss
more partners in a partnership. on realization to the partners, and
(4) pay liabilities. These steps
Articles of co-partnership should be performed in the
Capital balances in the MEM following order:

partnership are Mary, Capital The order of events in the liquidation of a

partnership is (2) sell noncash assets, (3)
60,000; Ellen, Capital 50,000; and
allocate gain/loss, (4) pay partnership
Mills, Capital 40,000, and an income liabilities, and (1) distribute the remaining
ratio are 5:3:2, respectively. A cash to the partners.

partnership, MEMO, was formed by Which of the following is NOT a

characteristic of a partnership?
admitting Oleg to the firm with a
cash investment of 60,000 for a 25% Taxable entity

capital interest. The bonus to be Capital balances in the MURF

partnership are Molly, Capital
credited to Mills, capital in P50,000; Ursula, Capital P40,000;
admitting Oleg is: Ray, Capital P30,000; and Fred,
Capital P20,000, and income ratios
150,000 (Total partnership capital after the are 4:3:2:1, respectively. Fred
investment by Oleg is P210,000 (P60,000 + withdraws from the firm following a
P50,000 + P40,000 + P60,000). Oleg’s share payment of P29,000 in cash from
of partnership capital is P52,500 (P210,000 the partnership. Ursula’s capital
× 25%). The total bonus to the old partners balance after recording Fred’s
related to Oleg’s admission is P7,500 withdrawal is:
[P60,000 (Oleg’s investment) − P52,500
P37,000
(Oleg’s share of partnership capital). Mills’

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 These can either be a certain
amount of pesos per share or a
certain percent of par or stated
value paid to stockholders.

Corporation Cash dividends

These represent the portion that is In the stockholders’ equity section,

free and can be declared as the cost of treasury stock is
dividends to shareholders. deducted from:

Unappropriated retained earnings Total paid-in capital and retained earnings

A-Team Corporation issued 1,000 The Retained Earnings account is:

shares of P5 par value stock for Net income retained in the corporation
land. The stock is actively traded at
P9 per share. The land was Lucroy Corporation issued 100
advertised for sale at P10,500. The shares of P10 par value preferred
land should be recorded at: stock at P12 per share. In recording
the transaction, credits are made
9,000 (P9 per share x 1,000). to:
The total cost of treasury shares Preferred Stock P1,000 and Paid-in Capital
shall be reported as: in Excess of Par—Preferred Stock P200
Deduction from shareholders’ equity
It is the issuance of shares by an
entity to the shareholders without
consideration and under conditions
indicating that such action is
prompted mainly by a desire to
increase the number of shares
outstanding to effect a reduction in
unit market price.
Stock Split
Total stockholders’ equity (in the
absence of treasury stock) equals:
Total paid-in capital + Retained earnings
Nonstock dividends shall be
recognized as liabilities on the:
Date of declaration

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