LABORATORY EXERCISE 1 Analyzing Transactions To Start A Business

Introduction
Transactions analyzed as to their effects on the assets, liabilities and owner’s equity using an
accounting tool called Accounting Equation.
Learning Outcomes
1. Define identify the first three elements of accounting.
2. Analyze transactions and present the accounting elements in a statement of financial
position
Materials
Online: Laptop or a cellphone, calculator
Modular: Black Ballpen a two column Journal notebook, calculator
Procedure
Problems:
A. Multiple Choice: Write the correct letter of choice before each number. (10 points)
A
_________ 1. Dual effect of a transaction which is also called the double
entry bookkeeping.
a. Venetian Model
b. Accounting Equation
c. Equality of Amounts
d. Accounting Model
B
_________ 2. Three features of a business transaction includes the
following except:
a. Two parties
b. Information may be financial of non-financial
c. Exchange of values
d. In terms of money
C
_________ 3. One of these features is not applicable for an asset
a. It is a thing of value owned by the business
b. It may be physical form (tangible) or may represent a right
(intangible)
c. Benefit for this has already been received
d. This is expected to have a long life
C
_________ 4. The financial structure may be stated in the following
accounting equation except:.
a. Assets = Claims of creditors and Owners
b. Assets - Creditor’s claim = Owner’s Equity
c. Assets = Liabilities
d. Assets = Liabilities + Owner’s Equity
D
_________ 5. Increase in assets may be a result of.
a. A decrease in another asset
b. An increase in liability
c. An increase in owner’s equity
d. All of these
C
_________ 6. A company’s assets are Php. 12,000,000 of which 1/3
represents owner’s equity. How much is the total liabilities.
a. Php. 6,000,000
b. Php. 3,000,000
c. Php. 8,000,000
d. Php. 4,000,000
A
__________ 7. The assets of the business at the start of the month totaled
Php. 1,000,000 with owner’s equity at Php. 800,000. Before the
month ended equipment worth Php. 500,000 were purchased,
with a down payment of Php. 150,000, the balance on credit.
At the start of the month, liabilities are
a. Php. 200,000
b. Php. 1,800,000
c. Php. 1,200,000
d. zero
B
__________ 8. Refer to no. 2, at the end of the month, liabilities are
a. Php. 1,150,000
b. Php. 550,000
c. Php. 800,000
d. Php. 1,000,000
A
__________ 9. A transaction caused a Php. 10,000 decrease in total assets.
This could have been due to a/an
a. Payment of a loan
b. Purchase of an equipment on account
c. Cash investment made by the owner
d. Purchase of equipment for cash
__________ 10. Allen Nature Trip, a travel agency, purchased equipment
for Php. 120,000, made a down payment of Php. 50,000 and
signed a note for the balance. This transaction will
a. Increase in total assets by Php. 120,000
b. Not affect owner’s equity
c. Increase total liabilities by Php. 50,000
d. All of the above choices are correct
B. Identify each of the following accounts as an A (Assets), L (Liabilities) or OE (Owner’s Equity).

(10 points)
Accounts Classification
Owner’s Drawing OE
Notes Payable L
Office Equipment A
Mortgage Payable L
Delivery Equipment A
Accounts Payable L
Miscellaneous Deposits A
Prepaid Rent A
Notes Receivable A
Patent A
C. Analyze the transactions using the format below and prove the accounting equation (30
points).
No Cash Advance Furniture Equipment Car Accounts Notes Quedan,

Rental & Fixture Payable Payable Capital
1
250,000 250,000 500,000
2
500,000 500,000
3
(250,000) 100,000 150,000
4
(50,000) (50,000)
5
(200,000) 400,000 200,000
6
(100,000) (100,000)
ASSETS = LIABILITIES + OWNER’S EQUITY
PHP 1,050,000 PHP 600,000 PHP 450,000
Bess Quedan began operating the Ace Modeling Agency with the following:
1. Invested cash of Php. 500,000, one half of which was paid for the lease contract of a floor
space in Makati.
2. She also borrowed Php. 500,000 from PNB and issued to PNB a 180-day promissory note.
3. One half of the amount borrowed was used to buy furniture and fixtures Php. 100,000 for
a set of computer, printer and fax machine Php. 150,000
4. She withdrew Php. 50,000 of the amount borrowed.
5. She also bought a car for Php. 400,000 from World motors paying 50% in cash with the
balance payable within a year.
6. She paid Php. 100,000 of the amount due to World Motors
D. Analyze the transactions using the format below and prove the accounting equation (50
points).
ASSETS LIABILITIES OWNER'S EQUITY

DATE CASH SUPPLIES LAND BUILDING EQUIPMENT FURNITURE & FIXTURES ACCOUNTS PAYABLE LOANS PAYABLE VALDEZ, CAPITAL
The following transactions were entered into Dr. Jo Valdez for the month of June:
04 Jo Valdez opened “Jo’s Health Spa” by investing Php. 1,500,000

cash and half of a lot inherited by Jo and her sister Ann worth
Php. 500,000
07 Interviewed a nurse and a business graduate to work for her for
a salary of Php. 15,000.
08 Valdez bought for cash Php. 900,000 worth of equipment and
Php. 15,000 worth of supplies
10 Bought furniture & fixtures from a friend at a cost of Php. 150,000
promising to pay after 7 days. Only Php. 80,000 of this was
placed in the clinic. The remaining Php. 70,000 furniture and
fixtures were placed in her condominium unit.
12 Applied for a Php. 2,500,000 business loan from a bank by
mortgaging her inherited lot. The money will be used to construct
the clinic.
14 Withdrew supplies worth Php. 2,000 for personal use.
15 The loan was approved, and the money deposited for the
account of the health spa.
17 Paid one half of the amount due on the furniture & fixtures.
30 A two-story clinic was constructed on the inherited lot. The
construction cost amounted to Php. 2,400,000. Terms: down
payment Php. 500,000 and a note for the balance.
a. Analyze the transactions in the format given.

b. Prepare the statement of financial position as at June 30, using the final balances:

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Introduction

B. Identify each of the following accounts as an A (Assets), L (Liabilities) or OE (Owner’s Equity).

No Cash Advance Furniture Equipment Car Accounts Notes Quedan,

PHP 1,050,000 PHP 600,000 PHP 450,000

ASSETS LIABILITIES OWNER'S EQUITY

04 Jo Valdez opened “Jo’s Health Spa” by investing Php. 1,500,000

a. Analyze the transactions in the format given.

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