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CHAPTER 1 ACCOUNTING IN BUSINESS
IN BOOK-KEEPING MODEL, WHAT SHOULD BE THE INPUT & OUTPUT?

Record Sort Summarize
INPUT OUTPUT
Most people draw a distinction between book-keeping & accounting. Accountants know how to do
everything that a book-keepers does. In addition, they do much more. Next to each of the following, write a
B if it is done by both a book-keeper and an accountant; write an A if the activities is done only by
accountant?
a, Making a record of daily cash sales
b, Interpreting and analyzing the results of weekly summary of events affecting the business
c, Classifying events affecting the business according to type of events
d, Setting up a book-keeping system
FILL IN THE MISSING WORDS, CIRCLE THE CORRECT RESPONSES

Accounting defined
1, The accounting process (or accounting cycle) may be defined as the systematic process
that identifies, measures, and reports relevant.information
about business organisations to interested users
2, Accountants observe many events of a business entity and---------------and measure in
financial terms (in dollars) those events considered evidence of economic activities (or
events)
3,Which of the following would be considered economic activities?
A, Manufacture of goods
B, Sale of manufactured goods,
C, Treatment of a hospital patient
D, Purchase of a large piece of machinery

The nature of accounting information
4, Accountants report on financial activities by preparing financial statements (reports).
Often, accountants are asked to interpret these statements and reports for various groups
such as management and creditors, to determine how the business entity is performing
compared to (prior/future) years and other similar business entities
5, Timeliness requires financial information to be provided at a time when it may be
considered in reaching a decision. The usefulness of information (increase/decrease) with
time
6,Accounting information is useful to managers and workers, investors and creditors,
and other parties such as government agencies. Accounting information provides data to
help the decision-making process of persons:
A. Inside the business entity (internal decision-maker)
B. Outside the business (external decision-makers)
C.Both (a) and (b)
FILL IN THE MISSING WORDS, CIRCLE THE CORRECT RESPONSES

Types of decision-makers
7, Accounting is often divided into two categories: managerial accounting (for internal
decision-makers) and financial accounting (for--------------decision-makers)
8,Creditors and lenders. Should a loan be granted to the business entitiy? Will the business
entity be able to pay its..as they become due?
9, Financial statements are formal R. Providing information on a business
entity's financial position (solvency), cash inflows and outflows, and the results of
operations
10, Financial accounting information is historical in nature, reporting on what has happened
in the .Thus, external parties use relevant and reliable financial statements to
make present decisions about future events
11, Financial statements are practical means of demonstrating that business has achieved
these primary objectives. The financial statement that reflects a company's profitability is
the i..s
12,The .shows the change in owner's equity between the
beginning of the period (ex: a month) and the end of that period
13,A fourth financial statement, the statement of cash flows, shows the cash inflows
andoutflows for a company over a period of time
FILL IN THE MISSING WORDS, CIRCLE THE CORRECT RESPONSES

MATCH EACH OF THE FOLLOWING STATEMENTS WITH ITS PROPER TERM

1. An information system that provides reports to stakeholders about the economic
activities and condition of a business
2. Assets = Liabilities + Owners Equity
3. The resources owned by a business
4. A list of assets, liabilities and owners equity that have occurred during a specific period
of time, such as a month or a year
5. An economic event or condition that directly changes an entitiess financial condition or
directly affects its results of operations
A. Account B. Account Payable C. Account Receivable
D. Accounting E. Accounting Equation F. Assets
G. Financial Accounting H. Management Accounting I. Business transactions
J. Expense K. Liabilities L. Owners Equity
M. Revenue N. Prepaid expense O. Balance sheet
P. Statement of Cash flow Q. Statement of Owners Equity R. Income Statement
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MATCH EACH OF THE FOLLOWING STATEMENTS WITH ITS PROPER TERM

6. The amounts used in the process of earning revenue
7. A specialized field of accounting concerned primarily with the recording and
reporting of economic data and activities to stakeholders outside the business
8. A summary of the revenue and expenses for a specific period of time such as
a month or a year
9. The rights of creditors that represent debts of the business
10. The rights of the owners
A. Account B. Account Payable C. Account Receivable
D. Accounting E. Accounting Equation F. Assets
G. Financial Accounting H. Management Accounting I. Business transactions
J. Expense K. Liabilities L. Owners Equity
M. Revenue N. Prepaid expense O. Balance sheet
P. Statement of Cash flow Q. Statement of Owners
Equity
R. Income Statement
MATCH EACH OF THE FOLLOWING STATEMENTS WITH ITS PROPER TERM


11. Items such as supplies that will be used in the business in the future
12.The amount of a business earned by selling goods or services to its
customers
13. A summary of the cash receipts and cash payments for a specific period of
time, such as a month or a year
14. A summary of the changes in owners equity that have occurred during a
specific period of time, such as a month or a year

A. Account B. Account Payable C. Account Receivable
D. Accounting E. Accounting Equation F. Assets
G. Financial Accounting H. Management Accounting I. Business transactions
J. Expense K. Liabilities L. Owners Equity
M. Revenue N. Prepaid expense O. Balance sheet
P. Statement of Cash flow Q. Statement of Owners
Equity
R. Income Statement
MATCH EACH OF THE FOLLOWING STATEMENTS WITH ITS PROPER TERM

15. The liability created by a purchase on account
16. A claim against the customer
17. An accounting form that is used to record the increases and decreases in each
financial statement item
18. A specialized field of accounting that used estimated data to aid management in
running day-to-day operations and in planning future operations
A. Account B. Account Payable C. Account Receivable
D. Accounting E. Accounting Equation F. Assets
G. Financial Accounting H. Management Accounting I. Business transactions
J. Expense K. Liabilities L. Owners Equity
M. Revenue N. Prepaid expense O. Balance sheet
P. Statement of Cash flow Q. Statement of Owners
Equity
R. Income Statement
Classification: Asset, Liability, Revenue, Expense? If you think that
any item might fit into more than one of these categories, explain why?
a. Bank
b. S,Peel Capital
c. Accounts Payable
d. Accounts Receivable
e. Inventory for Funiture
Fabrics
f. Interest
g. Investment
h. Land mortaged to a Building Society
i. Mortage Payable
j. Motor Vehicles
e. Rent
k. Salaries & Wages
l. Repair Fees
m. Inventory of Other Materials
N . Tools

Answer the following questions
(Hint: Use the accounting equation.)

Cadence Office Supplies has assets equal to $123,000 and liabilities equal to
$47,000 at year-end. What is the total equity for Cadence at year-end?
At the beginning of the year, Addison Companys assets are $300,000 and its equity
is $100,000. During the year, assets increase $80,000 and liabilities increase
$50,000. What is the equity at the end of the year?
At the beginning of the year, Quasar Companys liabilities equal $70,000. During
the year, assets increase by $60,000, and at year-end assets equal $190,000.
Liabilities decrease $5,000 during the year. What are the beginning and ending
amounts of equity?
Leora Holden began a professional practice on June 1 and plans to prepare financial
statements at the end of each month. During June, Holden (the owner) completed these
transactions.
a. Owner invested $60,000 cash along with equipment that had a $15,000 market value.
b. Paid $1,500 cash for rent of office space for the month.
c. Purchased $10,000 of additional equipment on credit (payment due within 30 days).
d. Completed work for a client and immediately collected the $2,500 cash earned.
e. Completed work for a client and sent a bill for $8,000 to be received within 30 days.
f. Purchased additional equipment for $6,000 cash.
g. Paid an assistant $3,000 cash as wages for the month.
h. Collected $5,000 cash on the amount owed by the client described in transaction e.
i. Paid $10,000 cash to settle the liability created in transaction c.
j. Owner withdrew $1,000 cash for personal use.
Analysing the transactions?
Show new balances after each transaction.
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Analysing the transactions?
Show new balances after each transaction.
Required

+Cash
+Accounts Receivable
+Equipment
+Accounts Payable
+Holden, Capital
+Holden, Withdrawals
+Revenues; and Expenses.

Then use additions and subtractions to show the effects of the transactions
on individual items of the accounting equation. Show new balances after each
transaction.
Create a table like the one in Exhibit 1.9, using the following headings for columns:
Provide an example that creates the desbribed
effects for the separate case a through g
a. Increases an asset and increases a liability
b. Decreases a liability and increases a liability
c. Decreases an asset and decreases a liability
d. Increases an asset and decreases an asset
e. Increases a liability and decreases equity
f. Increases an asset and increases equity
g. Decreases an asset and decreases equity

CHAPTER 2 ANALYSING TRANSACTIONS CHAPTER 2 ANALYSING
The following is a list of accounts and identification letters A through J for
Shannon Management Co.:

a. Shannon, Capital
b. Interest Payable
c. Land
d. Shanoon, Withdrawals
e. Fees Earned
f Prepaid Rent
g Advertising Expense
h Unearned Revenue
i. Commissions Earned
j. Notes Receivable

Use the formbelow to
identify the type of account
and its normal balance. The
first itemis filled in as an
example.
CHAPTER 2 ANALYSING
Josephine's Bakery had the following assets and liabilities at the beginning and
end of the current year:


a. If Josephine made no investments in the business and withdrew no assets during
the year, what was the amount of net income earned by Josephine's Bakery?
b. If Josephine invested an additional $12,000 in the business during the year, but
withdrew no assets during the year, what was the amount of net income earned by
Josephine's Bakery?
Assets Liabilities
Beginning of the year $ 114,000 $ 68,000
End of the year 135.000 73.000
EXERCISE 1: MAKING THE JOURNAL ENTRIES???


1. J. Scott invests $20,000 cash to start the business.
4. Borrowed $1,000 cash from Bank to pay for
suppliers payables
2. Purchased equipment for $15,000 cash.
3. Purchased Supplies of $200 and Equipment
of $1,000 on account.
6. Paid advertising fees of $800 cash
5. Provided consulting services receiving $3,000 cash
7. A withdrawal of $500 cash is made by the owner.
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EXERCISE 2
1, LINH deposits $ 25,000 in a bank account in the name of ACC
2, Exchanged $ 20,000 cash for land
3, Buying supplies for $ 1,350 and agreeing to pay the supplier in the near future
4, During its first month of operations, ACC provided services to customers,
earning fees of $ 7,500 and receiving the amount in cash
5, The expenses paid during the month were as follows: wage $2,125$; rent $ 800
and miscellaneous $725
6, ACC pays $ 950 to creditors during the month
7. At the end of the month, the cost of the supplies on hand (not used) is $ 550.
The remainder was used in the operation of business and treated as expense
8, At the end of the month, LINH withdraws $ 2,000 in cash from the business for
personal use