478605478 CASH TO Accrual Single Entry with Answers PDF

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THEORIESTRUE OR FALSE Under cash basis, revenue is recorded when earned and realized. False The cash basis is less useful in predicting the timing and amounts of future cash flows True Under the cash basis of accounting, depreciation of assets having an economic life of more than one year is not rec...

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CASH TO ACCRUAL ACCOUNTING & SINGLE ENTRY SYTEM

THEORIES TRUE OR FALSE 1. 2. 3. 4. 5. 6. 7. 8. 9.

10 . 11

12 . 13 . 14 . 15 .

Under cash basis, revenue is recorded when earned and realized. The cash basis is less useful in predicting the timing and amounts of future cash flows Under the cash basis of accounting, depreciation of assets having an economic life of more than one year is not recognized The net income over the life of an entity is the same under the cash basis and accrual basis Under IFRS, events are recorded in the period in which the event occurs Under cash basis, no bad debts are recorded Under accrual basis, depreciation is provided normally The same as depreciation, discount or premium on financial instruments is recognized under cash basis Under accruals basis of accounting, the effects of transactions and other events are recognized when they occur (and not as cash or its equivalent is received or paid) and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate. Under cash basis of accounting, income is recognized only when cash is received and expense is recognized only when cash is paid Under single entry system, increases in net assets and decrease in liabilities increase net assets while increase in liabilities and decrease in assets decrease net assets. Under single entry system, cash on hand and cash records reconciled with bank statements are possible sources for generating cash account balance A single entry system is a system of record keeping in which transactions are not analyzed and recorded in the double entry framework Cashbook is the major record under the single entry system Any set of procedures that does not provide for a debit-credit analysis is referred to as single-entry accounting system.

False True False True True True True False True

True True True

True True True

MULTIPLE CHOICE 1. The inventory and accounts payable balances decreased. Should these decreases be added or deducted from cash payments to suppliers to arrive at cost of goods sold for the current year? Decrease in Inventory Decrease in Accounts Payable a. Added Deducted b. Added Added c. Deducted Deducted d. Deducted Added 2. Compared to the accrual basis of accounting, the cash basis overstates income by the net decrease during the accounting period of: a. Both accounts receivable and accrued expenses b. Accrued expenses but not of accounts receivable c. Neither accounts receivable nor of accrued expenses d. Accounts receivable but not of accrued expenses 3. When converting from cash basis to accrual basis of accounting, which of the following adjustments should be made to cash collections from customers to determine accrual basis service revenue? a. Subtract ending accounts receivable b. Add ending accounts receivable c. Subtract beginning unearned service revenue d. Add cash sales

CASH TO ACCRUAL ACCOUNTING & SINGLE ENTRY SYTEM 4. When converting from cash basis to accrual basis of accounting, which of the following adjustments should be made to cash paid for operating expenses to determine accrual basis operating expenses? a. Add beginning accrued liabilities b. Subtract beginning prepaid expense c. Subtract ending prepaid expense d. Subtract interest expense 5. Which of the following statements is true regarding single-entry accounting system? a. It is adopted by organizations with complex and numerous transactions b. It is also called incomplete records because only minimal accounting records are kept without the benefit of a complete accounting system c. The single entry method of determining profit is the transaction approach d. Transactions are analyzed in terms of debits and credits 6. The net worth method , otherwise known as the capital maintenance approach, is a concept in which a. Profit = Change in fair value of net assets during a period b. Profit = Amount that an enterprise could distribute to its owners and be as well off at the end of the period as it was at the beginning of the period c. The financial statements effects of business events classified as revenues, gains, expenses and losses, which are used to measure and define profit d. Fair value adjusted for the effects of inflation or deflation are used to measure profit 7. Which of the following is true? a. The double –entry bookkeeping system requires analysis of transactions in terms of debits and credits b. The single entry system is adopted by organizations whose activities are few and simple, so that they do not employ the services of a bookkeeper c. The minimum record kept under the single entry system is the daybook which records transactions in chronological order in narrative form d. All of the above 8. All of the following are correct, except: a. Incomplete records is another term for double entry system b. Double-entry system is a system of recording transactions in a way that maintains the equality of the accounting equation c. Cash basis does not recognize accruals and deferrals d. Single-entry system does not provide for a debit-credit analysis of transactions

STRAIGHT PROBLEMS 1. Data:

Trade accounts receivable Allowance for doubtful accounts Trade notes receivable Customer advances

January 1, 2019 P 1,000,000.00 200,000.00 1,000,000.00 400,000.00

December 31, 2019 P 3,895,000.00 237,000.00 2,100,000.00 650,000.00

Additional information for CY 2019: Sales return and allowances Accounts written off Cash receipts from customers Notes receivable discounted without recourse

P

Requirements: 1.1 Compute the gross sales under accrual basis 1.2 Compute the net sales under accrual basis 2. Data:

40,000.00 65,000.00 3,600,000.00 400,000.00

P 7,850,000.00 P 7,810,000.00

CASH TO ACCRUAL ACCOUNTING & SINGLE ENTRY SYTEM

Account Accounts Receivable Customers Advances Allowance for doubtful accounts

Increase (Decrease) (P 95,000.00) 100,000.00 52,000.00

Additional information for CY 2019: Sales return and allowances Accounts written off Cash receipts from customers

P

45,000.00 50,000.00 4,950,000.00

Requirements: 2.1 Compute the gross sales under accrual basis 2.2 Compute the net sales under accrual basis

P 4,850,000.00 P 4,805,000.00

3. Karen Company reported total purchases of P2, 500,000 in its cash basis financial statement on December 31, 2019. Requirements: Compute purchases and cost of sales under accrual basis under each of the following assumptions

1. 2. 3. 4.

Beginning Balance Accounts Merchandise Payable Inventory P 600,000.00 P 400,000.00 900,000.00 500,000.00 700,000.00 400,000.00 840,000.00 500,000.00

Ending Balances Accounts Merchandise Payable Inventory P 800,000.00 P 460,000.00 650,000.00 430,000.00 850,000.00 460,000.00 760,000.00 430,000.00

Accrual Basis Purchases Cost of Sales P 2,700,000.00 2,250,000.00 2,650,000.00 2,420,000.00

P 2,640,000.00 2,320,000.00 2,590,000.00 2,490,000.00

4. Under the cash basis, rent income and rent expense of Diesel Company for the calendar year 2019 is P615, 000.00 and P500, 000, respectively. Additional information are presented below: Rent collected in advance , beginning of the year Rent collected in advance , end of the year Rent earned , but not yet collected, beginning of the year Rent earned , but not yet collected, end of the year Rent paid in advance , beginning of the year Rent paid in advance, end of the year Rent incurred, but not yet paid, beginning of the year Rent incurred, but not yet paid, end of the year

50,000 75,000 30,000 40,000 80,000 90,000 45,000 40,000

Requirements: Under accrual basis, compute the following: P 600,000.00 4.1 Rent income 4.2 Rent expense P 485,000.00

5. Under the cash basis, interest expense of Millan Company for the calendar year 2019 is P 800,000.00 Additional information are presented below: Interest receivable, end Interest receivable, beg

60,000 80,000

Requirements: Answer each independent question: 5.1 Assume discount amortization of debt investment is P 10,000.00, what is the interest revenue P 790,000.00 under the accrual basis? 5.2 Assume, premium amortization of debt investment is P15, 000.00, what is the interest revenue under accrual basis? P 765,000.00 6. Calapan Company provided the following data:

CASH TO ACCRUAL ACCOUNTING & SINGLE ENTRY SYTEM

January 1 1,200,000 1,500,000

Accounts receivable Accounts payable

December 31 1,350,000 1,850,000

During the current year, accounts written off amounted to P100, 000. Sales return totaled P250, 000, of which P50, 000 was paid to customer. Cash receipts from customers after P500, 000 sales discounts amounted to P8, 000,000. Cash payments to trade creditors totaled P5, 000,000 after purchase discounts of P200, 000. Purchase returns amounted to P400, 000, of which P100, 000 was received from supplier. Questions: 5.1 Under accrual, what is the amount of gross sales? 5.2 Under accrual, what is the amount of net sales? 5.3 Under accrual, what is the amount of gross purchases? 5.4 Under accrual, what is the amount of net purchases?

P 8,950,000.00 P 8,200,000.00 P 5,850,000.00 P 5,250,000.00

7. Eros Company kept the records on a cash basis. The entity reported the following cash basis income statement for 2019: Revenue Expenses Net Income

1,910,000 809,000 1,101,000

The following amounts of accrued, prepaid, and unearned items were ignored at the end of 2018 and 2019: 2018 2019 Accrued revenue 91,000 73,000 Unearned revenue 66,000 108,000 Accrued expenses 49,000 65,000 Prepaid expenses 46,000 56,000 What is the net income under accrual basis for 2019?

P 1,035,000.00

8. During the current year, Tara Company received P8, 000,000 from tenants. The statement of financial position contained the following data: Increase in rent receivable Decrease in unearned rent revenue Uncollectible rent written during the year

280,000 800,000 500,000

What amount of revenue should be reported for the current year?

P 9,580,000.00

9. During 2018, Cooke Company acquired patent right and remitted royalties of P3, 000,000. The entity reported prepaid royalties of P550, 000 and P450, 000, royalties payable of P800, 000 and P750, 000, respectively, on December 31, 2017 and 2018. What amount should be reported as royalty expense for 2018?

P 3,050,000.00

10. Vela Company reported the following increases in account balances during the current year: Assets Liabilities Share Capital Share Premium

10,000,000 2,700,000 6,000,000 600,000

Except for a P1, 300,000 dividend payment and the year’s earnings, there were no changes in retained earnings for the year. What is the net income for the current year?

P 2,000,000.00...