Accounting Basics: Partial Payments & Equations

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Questions and Answers

What would be the balance after the purchase of inventories on January 3rd?

200,000

179,000 (correct)

220,500

179,500

Which item is considered a part of the general ledger?

Cash Balance

Investment by Owner (correct)

Purchasing Report

Accounts Receivable Ledger

What is the main purpose of the Chart of Accounts?

To categorize accounts and their account numbers (correct)

To list every transaction of the business

To provide detailed balances of expenses

To organize individual transaction records

What should be done with the 'Debt' column in the general ledger?

Write the amount debited for each transaction Signup and view all the answers

What represents the 'J.R.' in the general ledger?

Journal Reference indicating page number Signup and view all the answers

Which is NOT a part of the elements recorded in the general ledger?

Detailed Customer Information Signup and view all the answers

What is indicated by a 'Special Ledger'?

Detailed individual balances for specific accounts Signup and view all the answers

What action needs to be performed with the balance in the general ledger?

Provide a running balance for each transaction Signup and view all the answers

What is the effect on the accounting equation when expenses increase?

Decrease in assets Signup and view all the answers

What should be recorded when the service is performed but not yet paid for?

Accounts receivable Signup and view all the answers

How does recognizing income from services affect owner's equity?

Increases owner's equity Signup and view all the answers

What represents an outflow of resources and impacts owner's equity negatively?

Expenses Signup and view all the answers

What was the total service revenue recognized from the service rendered on July 27?

PHP 20,000 Signup and view all the answers

What happens to accounts receivable when cash is collected from a customer's account?

Decreases accounts receivable Signup and view all the answers

What is the effect on the accounting equation when a telephone bill is paid?

Decrease in owner's equity Signup and view all the answers

When income is recognized under the accrual basis, which account is affected?

Revenues account Signup and view all the answers

What type of account is decreased when recording the partial payment of a truck purchased on account?

Notes Payable Signup and view all the answers

What is the correct journal entry for receiving ₱5,400 from billed clients on July 7?

Debit Cash ₱5,400; Credit Accounts Receivable ₱5,400 Signup and view all the answers

What is recorded when Geraldine Garcia pays ₱10,000 in advance for two months' rent on July 1?

Decrease in Assets Signup and view all the answers

How should the purchase of office furniture for ₱15,000 in cash be recorded?

Debit Office Furniture ₱15,000; Credit Cash ₱15,000 Signup and view all the answers

What represents the amount paid for the truck as a partial payment on October 30?

₱10,000 Signup and view all the answers

Which transaction would cause an increase in assets on July 5?

Performing services for ₱10,800 on credit Signup and view all the answers

What is the effect on the equation when cash is used to pay for the fax machine?

Assets decrease and Liabilities decrease Signup and view all the answers

What is the amount of cash collected from billed clients on July 27?

₱2,000 Signup and view all the answers

What was the total increase in owner's equity after Paolo invested cash and cars into the business?

PHP 1,000,000 Signup and view all the answers

Which of the following transactions represents an increase in both assets and liabilities?

Borrowing PHP 100,000 from the bank Signup and view all the answers

After the purchase of tables and chairs, what was the effect on the total assets?

Remained the same Signup and view all the answers

How much cash does Paolo have after borrowing PHP 100,000 from the bank?

PHP 900,000 Signup and view all the answers

What effect does Paolo's initial investment have on the accounting equation?

Increase in assets and owner's equity Signup and view all the answers

What category does the PHP 100,000 borrowed from the bank fall into?

Liabilities Signup and view all the answers

What is the initial total value of assets after Paolo's investment?

PHP 1,000,000 Signup and view all the answers

Which of the following statements is true regarding the accounting equation after all transactions?

Total assets must equal total liabilities and owner's equity Signup and view all the answers

What is the effect on the Cash account when the owner invests Php 450,000 in the business?

Increase in Cash Signup and view all the answers

How is an increase in owner's equity recorded in the accounting equation?

By a credit Signup and view all the answers

Which account title is associated with the recording of initial investments?

Cash Signup and view all the answers

What type of account is 'Del Mundo, Capital' classified as?

Owner's Equity Signup and view all the answers

What is the appropriate journal entry for the advance payment of rent in October?

Debit Prepaid Rent, Credit Cash Signup and view all the answers

What should be done if an appropriate account title is not listed in the chart of accounts?

Add the additional account Signup and view all the answers

Which of the following account numbers corresponds to liabilities in the chart of accounts?

2XX Signup and view all the answers

Which statement accurately reflects the recording of an increase in assets?

Recorded by a debit Signup and view all the answers

Study Notes

Recording Partial Payments

On October 30th, the business collected a partial payment of Php 12,500 from 5 customers who were previously billed.
The business also made a partial payment on the Notes Payable for a previously purchased truck.
The payment was 10% of the outstanding balance, amounting to Php 10,000.

Understanding the Accounting Equation

The Accounting Equation is: Assets = Liabilities + Owner's Equity.
It represents the fundamental relationship between a company's resources (assets), its obligations (liabilities), and the owner's investment (owner's equity).
Each transaction must be analyzed to determine how it impacts the equation.

Transaction Analysis

Investment by Owner: When the owner invests cash and cars, both assets and owner's equity increase.
Borrowings from Bank: Borrowing from the bank increases cash (assets) and loans payable (liabilities).
Asset Purchase for Cash: Buying tables and chairs with cash decreases cash (assets) and increases furniture (assets). The total assets remain the same, but their composition changes.
Payment of Expenses: Paying telephone, electric, and water bills decreases cash (assets) and increases expenses. Increased expenses lead to a decrease in owner's equity.
Revenue Earned on Account: When services are performed but payment is promised later, accounts receivable (assets) increase, and income (owner's equity) increases as well.
Revenue Received with Partial Payment: If a customer pays part of a bill in cash, both cash (assets) and accounts receivable (assets) increase, while the total service revenue remains the same.
Collection of Customer Account: When a customer pays their outstanding balance, cash (assets) increases, and accounts receivable (assets) decreases.

The General Ledger

The General Ledger contains a record of all accounts and their balances in a company.
It includes account titles, numerical codes, dates, explanations, journal references, debit amounts, credit amounts, and running balances.
The General Ledger helps to track the financial status of the business.

Special Ledgers

Special Ledgers provide more detailed information about specific accounts.
For example, an Accounts Receivable Ledger tracks individual customer balances, and an Accounts Payable Ledger tracks individual creditor balances.

Chart of Accounts

The Chart of Accounts is a list of all the accounts used by a business, organized by category.
The chart specifies numerical codes for each account.
It helps to analyze transactions and decide which accounts will be affected.

Recording Initial Investment

When Galicano Del Mundo invests Php 450,000 in the business, it increases both cash (assets) and Del Mundo, Capital (owner's equity).
Since assets are increased, they are recorded on the debit side.
Increases in owner's equity are credited.

Recording Rent Paid in Advance

When the business pays rent in advance for three months, it increases Prepaid Rent (assets), which is an asset. Since assets are increased, they are recorded on the debit side.
The corresponding credit will be to Cash.

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Description

This quiz focuses on understanding partial payments in accounting and the fundamental accounting equation. It includes scenarios about customer payments and owner investments, helping students analyze transactions' impacts on financial statements. Ideal for learners in accounting classes or practical business applications.