ACC 179 | Updates in Management Accounting Part 1

Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Lesson Title: Review on Bookkeeping Skills 1 Materials:

Lesson Objectives:
At the end of this module, the students should be able to:
1. Review the basic principles of double entry accounting References:
2. Revisit the use of T-accounts to analyze business
transactions
3. Differentiate service concern and merchandising and the
unique transactions of each
4. Prepare charts of accounts for both service concern and
merchandizing business

Productivity Tip:
“The only thing to do with good advice is to pass it on. It is never of any use to oneself.” - Oscar Wilde

A. LESSON PREVIEW/REVIEW
1) Introduction (2 mins)
Good Day! This semester, we will go through the course on Updates in Management Accounting.
This may be new to you but basically, this is just a review on your basic accounting and cost accounting.
New things will be discussed down the line such as new processes and practices in the field and also
introduce you to other professional certifications you can avail in your future professional journeys.

2) Activity 1: What I Know Chart, part 1 (3 mins)

What I Know Questions: What I Learned (Activity 4)
1. What is the accounting equation?

2. Give three examples of accounts

with a normal balance of debit.

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 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

B. MAIN LESSON
1) Activity 2: Content Notes (13 mins)
Double Entry Accounting
Double entry, a fundamental concept underlying present-day bookkeeping and accounting, states that
every financial transaction has equal and opposite effects in at least two different accounts. This
concept in bookkeeping and accounting satisfies the accounting equation:

Assets = Liabilities + Equity

In the double-entry system, transactions are recorded in terms of debits and credits. Since a debit in
one account offsets a credit in another, the sum of all debits must equal the sum of all credits. The
double-entry system of bookkeeping standardizes the accounting process and improves the accuracy
of prepared financial statements, allowing for improved detection of errors.

Debits and credits are essential to the double entry system. In accounting, a debit refers to an entry on
the left side of an account ledger, and credit refers to an entry on the right side of an account ledger.
To be in balance, the total of debits and credits for a transaction must be equal. Debits do not always
equate to increases and credits do not always equate to decreases.

T-Account Analysis
Coming from the discussion on double entry accounting, there is a tool that can be used to analyze
business transactions. This is the T-account. This is the graphical representation of the general ledger
that records business transactions. This visualizes the business transaction on how the transaction
affects one account/s (debit) and another account/s (credit).

Before we proceed, let’s revisit what the normal balances of various accounts are:
Assets – Debit
Liabilities – Credit
Equity – Credit
Revenue – Credit
Expenses – Debit

The T-account is consist of the following:

• Account title
• Debit side (left)
• Credit side (right)

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 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Please see example below:

Increases to the account will be put in the accounts normal balance (ie: Assets – Debit) and decreases
to the account will be put in the opposite side.

Illustration:
Transaction 1: Owner Invested P 25,000 in his new company, a barbershop.

Cash is an asset, and the investment is an increase in cash for the company, thus it is put in the debit side.
The investment is also an increase in equity, thus it is put in the credit side.
Transaction 2: Barber chairs were purchased worth P 15,000.

There is a decrease in cash to purchase the barber chairs, thus credit. And the barber chairs are assets, thus
it be debit.
Transaction 3: Total haircut revenue for the month is P 3,000.

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 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Cash is received as payment of haircuts, thus debit. Haircut Revenue has a credit normal balance.

After all the transactions for the period have been analyzed, set the net value for the accounts. Net
balance put on the side (debit or credit) where there is greater value. This is the value that is then presented
in the financial statements after post-period adjustments.

Service Concern vs. Merchandising Businesses

In order to address various demands in the economy, businesses are formed. With that, businesses
can be categorized into various types. These are crucial as there are differences in the presentation of
financial statements for theses types of businesses. For now, we will discuss Service Concern and
Merchandising Businesses.
Service concern deals with the purchase and sale of service. Examples are barbershops, auto repair
shops, and movie houses.
Merchandising businesses is that branch of business that deals with the purchase and selling of
merchandise (products). Examples are supermarkets, sari-sari stores, and construction supply shops.
We have to identify the type of business we are dealing with (for now, Service vs. Merchandising) as
there are notable difference in their financial statements, particularly in the Statement of Comprehensive
Income.

Service Merchandising
Revenue P XXX Sales P XXX
Less: Expenses XXX Less: Cost of Sales XXX
Net Income XXX Gross Profit P XXX
Less: Operating Expenses XXX
Net Income P XXX

Furthermore, Cost of Sales is breakdown as follows (under periodic inventory system):

Beginning Inventory P XXX
Purchases XXX
Purchase Returns and Allowances (XXX)
Purchase Discounts (XXX)
Ending Inventory (XXX)
Cost of Sales P XXX

This document is the property of PHINMA EDUCATION

 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

2) Activity 3: Skill-building Activities (with answer key) (18 mins + 2 mins checking)
Circle the letter of the best answer
1. Which of the following accounting equations are correct?
[1] Non-current Assets + Current Assets = Non-current Liabilities – Current Liabilities + Capital
[2] Assets – Liabilities = Capital + Revenue – Expenses
[3] Capital + Non-current Liabilities = Non-current Assets + Working Capital
a. 1 and 2 only
b. 1 and 3 only
c. 2 and 3 only
d. 1 and 2 and 3
2. Which of the following is not an example of additional capital?
a. A sole proprietor purchases a car through the bank account of the entity.
b. A sole proprietor brings a second-hand computer from his home to the office.
c. A sole proprietor transfers P 1,000 from his own bank account to the entity’s account.
d. A sole proprietor uses his own building as an office without receiving any rent.
3. Which of the following is not an example of non-current assets?
a. a second-hand computer used in the office
b. a van that is purchased through installments the total amount of which is not fully settled
c. P 40,000 cash
d. a building bought by the entity
4. Which of the following statements are correct?
[1] The total amount of liabilities can be greater than the total amount of capital.
[2] Assets = Capital + Liabilities
[3] The total amount of assets can be greater than the sum of liabilities and capital.
a. 1 and 2 only
b. 1 and 3 only
c. 2 and 3 only
d. 1, 2 and 3
5. The entity purchases P 10,000 fixtures for entity use on credit. Which of the following will be
affected?
[1] assets
[2] liabilities
[3] capital
a. 1 and 2 only
b. 1 and 3 only
c. 2 and 3 only

This document is the property of PHINMA EDUCATION

 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

d. 1, 2 and 3
6. Suppose a debtor repays his debt of P 50,000 by transferring the money into the bank account of
the business. The effect of the transaction on the accounting equation would be:
a. Both assets and liabilities increase by P 50,000.
b. Both assets and liabilities decrease by P 50,000.
c. Only assets decrease by P 50,000.
d. Assets and liabilities remain unchanged.
7. Under the double-entry system, what is the nature of X if assets, current liabilities, non-current
liabilities and capital are X, P40,000, P60,000 and P350,000 respectively?
a. P 250,000
b. P 350,000
c. P 370,000
d. P 450,000
8. Which of the following is correct under the double entry system?
a. Asset amount must be equal to liability account.
b. The change in asset must be compensated by a change in liability.
c. The change in a debit-side entry must be compensated by a change in credit-side entry.
d. An increase in asset must be compensated by a decrease in asset.
9. Which of the following statements regarding the double-entry system is incorrect?
a. An increase in asset means a credit entry in assets account.
b. A decrease in liability means a debit entry in liabilities account.
c. An increase in drawings means a debit entry in capital account.
d. A decrease in non-current asset means a credit entry in assets account.
10. Which of the following transactions affects the total value of liabilities of a firm?
a. goods purchased from suppliers by cash
b. interest received from bank
c. office equipment bought on credit
d. goods sold to customers on credit

3) Activity 4: What I Know Chart, part 2 (2 mins)

It’s time to answer the questions in the “What I Know Chart” in Activity 2. Write your answers in the “What I
Learned” column. Let’s see your improvement!

4) Activity 5: Check for Understanding (5 mins)

Circle the letter of the best answer
1. This refers to the process of transferring the credit and credit amounts from journals to ledger
accounts.

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 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

a. balancing off
b. transferring
c. posting
d. closing
2. This refers to the process of entering transactions into books of original entry.
a. identifying
b. classifying
c. reporting
d. recording
3. Arrange the following items in the order of the accounting cycle:
[1] record transactions into the books
[2] prepare financial statements
[3] make period-end adjustments
[4] post transactions to ledgers
a. 1, 4, 3, 2
b. 4, 1, 3, 2
c. 1, 4, 2, 3
d. 4, 1, 2, 3
4. A sole proprietor contributes his own van with the value of P 400,000 to the business. The journal
entry should be:
Debit Credit
a. Asset Liability
b. Cash Capital
c. Capital Van
d. Van Capital
5. A sole proprietor borrows P 50,000 cash from the bank for the purchase of computer equipment of
P 40,000 in the office. The remaining cash is held in hand. The journal entry should be:
Debit Credit
a. Equipment, P50,000 Bank Loan, P50,000
b. Equipment, P40,000 Bank Loan, P50,000
Cash, P10,000
c. Bank Loan, P50,000 Equipment, P40,000
Cash, P10,000
d. Cash, P50,000 Equipment, P40,000
Bank Loan, P10,000

This document is the property of PHINMA EDUCATION

 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

6. Which of the following journal entry is correct for the transactions of goods returned by a customer?
Debit Credit
a. sales returns trade payables
b. sales returns trade receivables
c. purchase returns trade payables
d. purchase returns trade receivables
7. Suppose an entity purchases P 50,000 goods on credit. The journal entry should be:
Debit Credit
a. Purchases Cash
b. Accounts Payable Purchases
c. Purchases Accounts Payable
d. Accounts Receivable Accounts Payable
8. Which of the following cases show(s) the situation(s) that the list price is higher than the net price
after a deduction as stated on the sales invoice?
[1] There is a trade discount of 5% given by the seller.
[2] There is a cash discount of 5% given by the seller.
[3] Some goods are returned to the supplier.
a. 1 only
b. 2 only
c. 1 and 3 only
d. 2 and 3 only
9. Which of the following is not a reason for sales discounts to be offered to the debtors?
a. increase the amount paid by the debtors
b. improve the liquidity by turning the accounts receivable into cash
c. encourage earlier settlement of debts by debtors
d. reduce the level of bad debts
10. Which of the following statements is correct about credit period?
a. If a customer purchases goods within the credit period, a cash discount will be allowed to the
customer.
b. If a customer settles the payment within the credit period, a cash discount will be allowed to the
customer.
c. It refers to the period in which customers must settle their debts due.
d. It refers to the period in which customers need to settle one-third of the debts in order to avoid
further interests charged.

This document is the property of PHINMA EDUCATION

 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

C. LESSON WRAP-UP
1) Activity 6: Thinking about Learning (5 mins)
Work tracker. Congratulations! You have finished the module for today! Shade the number of the module
that you finished.
First Period Second Period Third Period
1 2 3 4 5 6 7 8 9 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2
0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6

How do you feel today?

I feel (unsatisfactory/satisfactory/excellent) because
_______________________________________________________________.

What are your challenges in learning the concepts in this module? If you do not have challenges, what is
your best learning for today?
_____________________________________________________________________________________________________________
_____________________________________________________________________________________________________________
__________________

What are the questions/thoughts you want to share to your teacher today?
_____________________________________________________________________________________________________________
_____________________________________________________________________________________________________________
__________________

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