ASIAN INSTITUTE OF SCIENCE AND TECHNOLOGY BALIWAG

HOTEL AND RESTAURANT ACCOUNTING

MR. JOMAR V. VILLENA, CPA

MIDTERM LESSON 1: ACCOUNTING EQUATION

ACTIVITY 1
1. What is the basic accounting equation?
2. What is the expanded accounting equation?
3. What are the elements of accounting equation?
4. Define the elements of accounting equation.

Indicate whether the following account title/transaction is an example of Assets, Liabilities, Equity,
Revenue and Expenses.
1. Payment to employee salaries 11. Telephone Expense
2. Cash 12. Supplies
3. Tanga, Capital 13. Supplies Expense
4. Professional Fees 14. Land
5. Services rendered 15. Obligation to pay in bank
6. Accounts Payable 16. Equipment
7. Unearned Income 17. Bad Debts Expense
8. Accounts Receivable 18. Depreciation Expense
9. Tanga, Withdrawals 19. Prepaid Expenses
10. Inventories 20. Intangible Assets

ACTIVITY 2
Listed below are the ten business transactions for Puring Company during its first month of operations:
a. Owner invested cash in the business amounting to 300,000.
b. Purchased equipment for cash amounting to 50,000.
c. Purchased inventories through credit amounting to 35,000
d. Purchased furniture amounting to 30,000. Made a partial payment with cash 10,000 and incurred an
accounts payable for the balance of 20,000
e. Paid cash to the local government for business permit 9,000
f. Made sales of 17,000 12,000 cash sales and 5,000 credit sales.
g. The cost of the sale made in (f) amounted to 8,500
h. Paid the accounts payable in (d)
i. Collected 2,500 out of the 5,000 credit sales in (f)
j. Paid employee 12,000

Indicate the effects of the given transactions on each of the financial statement elements in the table shown
below. The answer for transaction (a) is given as an example:
Assets = Liabilities +Equity +Revenue - Expenses
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.

1|Reference book: FABM1byJOSELITOG.FLORENDO PAGES35-45

ASIAN INSTITUTE OF SCIENCE AND TECHNOLOGY BALIWAG
HOTEL AND RESTAURANT ACCOUNTING
MR. JOMAR V. VILLENA, CPA

MIDTERM LESSON 1: ACCOUNTING EQUATION

ACTIVITY 3
For each number, give a possible transaction that could result in the following changes in accounting
equation.
Transactions Assets Liabilities Equity
1 1000 1000
2 2000 2000
3 3,000
(3,000)
4 (4,000) (4,000)
5 (5,000) (5,000)
6 6,000 6,000
7 (4,000) (4,000)
*Nos. 6 and 7 (for revenue and expense)

ACTIVITY 4
Safety Insurance Agency, owned and operated by J. Wills, presented the following selected
transactions for the month of April, 2016
1 J. Wills invested 79,000 cash and office machines 40,000.
3 Borrowed 80,000 cash from a local bank to provide additional operating capital.
4 Purchased supplies worth 3,500 from Crown Enterprises, promising to pay in 30 days.
5 Paid Rent for the month 8,500
6 Collected service income from customers 7,500
7 Received advanced payment of 20,000 from a client for security services to be provided in the
next three months
9 Purchased additional supplies for cash 2,000
10 Rendered service to clients on account 15,000
13 Paid miscellaneous expenses 3,500
15 Paid salary expense 23,000
20 Received 7,000 from customer on accounts
25 Cash withdrawn for personal use 2,500
27 Paid 44,000 (including interest of 4,000 to a bank)
28 Paid various expenses 1,000
30 Paid supplies bought on April 4

1. Indicate the effect/s to the accounting equation.

ACTIVITY 5
J.VALONDA practices accounting under the business title J.VALONDA, CPA. During May 2016 his accounting
practice engaged in the following transactions.
1 Valonda deposited 500,000 cash in the business bank account
5 Paid monthly rent on accounting equipment 7,000
9 Paid 420,000 cash to purchase land for an office site.
10 Purchased supplies on account 12,000
19 Paid 10,000 on account.
22 Borrowed 200,000 from the bank for business use. Valonda signed a note payable to the bank
in the name of the business.
30 Revenues earned during the month included 60,000 cash and 50,000 on account.
Paid employee salaries 24,000, office rent 15,000 and utilities for 4,000.
Withdrew 40,000 cash from the business for personal use.

A. Indicate the effect/s to the accounting equation.

2|Reference book: FABM1byJOSELITOG.FLORENDO PAGES35-45