Principles of Accounting - Introduction

PRINCIPLES OF ACCOUNTING Angel G. Aniag, CPA Polytechnic University of the Philippines  Module 2- THE ACCOUNTING EQUATION AND ANALYZING BUSINESS TRANSACTIONS ASSETS = LIABILITIES +CAPITAL INCREASE IN ASSETS DEC = INC + INC INCREASE IN LIABS INC...

PRINCIPLES OF ACCOUNTING Angel G. Aniag, CPA Polytechnic University of the Philippines  Module 2- THE ACCOUNTING EQUATION AND ANALYZING BUSINESS TRANSACTIONS ASSETS = LIABILITIES +CAPITAL INCREASE IN ASSETS DEC = INC + INC INCREASE IN LIABS INC = DEC + DEC INCREASE IN CAPITAL INC = DEC + DEC ASSETS = LIABILITIES +CAPITAL NORMAL BALANCE DEBIT = CREDIT CREDIT ASSETS LIABILITIES CAPITAL  Module 2- THE ACCOUNTING EQUATION AND ANALYZING BUSINESS TRANSACTIONS PROBLEM 1-1 INSTRUCTIONS: On the space provided, indicate a CHECK MARK as to the Effect balances of the following accounts: INCREA DECREA SE SE 1. Notes payable was debited. x 2.Accounts receivable was credited. x 3. Cash was debited. x 4. Salary expense was debited x 5. Service income was credited. x 6. Accounts payable was credited x 7. Owner’s equity was credited. x 8. Cash was credited. x 9. Prepaid rent was debited x 10. Accounts payable was debited. x  Module 2- THE ACCOUNTING EQUATION AND ANALYZING BUSINESS TRANSACTIONS INCREA DECREAS SE E 11. Notes receivable was debited x 12. Salaries payable was debited x 13. Service revenue was debited x 14. Capital was debited x 15. Rent expense was debited x 16. Supplies was credited x 17. Utilities expense was debited x 18. Equipment was debited x 19. Unearned commission was debited x 20. Marlon drawing was debited x  Module 2- THE ACCOUNTING EQUATION AND ANALYZING BUSINESS TRANSACTIONS PROBLEM 1-2 INSTRUCTION: Compute the new balances of the following items. Consider each item separately: ORIG.B NEW BAL AL 1. Irene, Capital was debited by P10, 000 50,000 40,000 2. Prepaid rent was debited by P6, 000 12,000 18,000 3. Notes receivable was debited by P 3,500 14,000 17,500 4. Accounts payable was debited by P 5,000 26,000 21,000 5. Service income was credited by P 9,000 34,000 43,000 6. Salary expense was debited by P 8,200 22,000 30,200 7. Notes payable was credited by P20, 000 5,000 25,000 8. Accounts receivable was debited by P18, 000 3,000 21,000 9. Irene, Drawing was debited by P 2,000 8,000 10,000 10. Supplies Expense was debited by P2,200 --- 2,200 Module 2- THE ACCOUNTING EQUATION AND ANALYZING BUSINESS TRANSACTIONS ORIG.BAL NEW BAL 11. Accounts receivable was credited by ,P7,500 32,000 24,500 12. Utilities expense was debited by P3,200 1,000 4,200 13. Cash was credited by P 21,000 46,000 25,000 14. Mortgage payable was debited by P30,000 75,000 45,000 15. Rental Income was credited by P 15,000 9,000 24,000 16. Commission income was credited by P 25,000 4,000 29,000 17. Interest receivable was credited by P800 2,800 2,000 18. Taxes & licenses was debited by P3,000 5,200 8,200 19. Furniture & fixtures was credited by P400 10,000 9,600 20. Land was debited by P45, 000 60,000 105,000 21. Interest expense was debited by P750 6,800 7,550 22. Equipment was debited by P 6,900 3,700 10,600 23. Interest receivable was debited by P650 1,300 1,950 24. Tools was debited by P2, 000 4,000 6,000 25. Wages expense was debited by P 14,000 15,000 29,000 Module 2- THE ACCOUNTING EQUATION AND ANALYZING BUSINESS TRANSACTIONS EXERCISE 2-1. INSTRUCTIONS: On the space provided, indicate whether the normal balance of each of the given account is DEBIT or CREDIT: Building Interest Payable Supplies Accounts Payable Land Allow. for doubtful accts. Drawing Notes Receivable Mortgage Payable Rent Expense Commission Income Cash Prepaid Insurance Accumulated Depreciation Capital Equipment Furniture & Fixtures Professional Fees Sales Salary Unearned Income Module 2- THE ACCOUNTING EQUATION AND ANALYZING BUSINESS TRANSACTIONS EXERCISE 2-2. Write “T” if the statement is true and “F” if the statement is false. 1. The fundamental accounting equation is Assets = Liabilities 2. Revenue + Capital increases owner’s equity. 3. Payment of an expense increases asset. 4. Expenses decreases owner’s equity. 5. Receipt of cash decreases asset.