CBLM - Journalizing

HOW TO USE THIS COMPETENCY BASED LEARNING
MODULE
Welcome to the Module: Journalizing Transactions. This module

contains training materials and activities for you to complete. The unit of
competency Journalize Transactions contains the knowledge, skills and
attitudes required for NCIII. It is one of the Core Modules at Bookkeeping.
You are required to go through a series of learning activities in order

to complete each learning outcome of the module. In each learning outcome
there are Information Sheets, Resource Sheets and Reference Materials for
further reading to help you better understand the required activities. Follow
these activities on your own and answer the self-check at the end of each
learning outcome. Get the answer key from your instructor and check your
work honestly. If you have questions, please don’t hesitate to ask your
facilitator for assistance.
Recognition of Prior Learning (RPL)
You may already have some or most of the knowledge and skills covered
in this module because you have:
 been working for someone

 already completed training in this area
If you can demonstrate to your trainer that you are competent in a

particular skill or skills, talk to him/her about having them formally
recognized so you won’t have to do the same training again. If you have
qualifications or Certificates of Competency from previous trainings, show
them to your trainer. If the skills you acquired are still relevant to this
module, they may become part of the evidence you can present for RPL.
At the end of this learning material is a Learner’s Diary, use this diary to
record important dates, jobs undertaken and other workplace events that
will assist you in providing further details to your trainer or assessors. A
Record of Achievement is also provided for your trainer to complete once you
completed the module.
This learning material was prepared to help you achieve the required
competency, Journalize Transactions. This will be source of information for
you to acquire the knowledge and skills in this particular trade
independently and your own pace with minimum supervision or help from
your instructor.
CBLM on Document No. 2013 - 001

Bookkeeping NC III Date Developed: Issued by:
August 7, 2013 1|Page
Journalizing ACLC - Tacloban
Transactions Developed by: Revision # 00
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In doing the activities to complete the requirements of this module,
please be guided by the following:
 Talk to your trainer and agree on how you will both organize the training
under this module. Read through the module carefully. It is divided into
sections that cover all the skills and knowledge you need to successfully
complete.
 Work through all information and complete the activities in each section.
Read the information sheets and complete the self-checks provided in
this module.
 Most probably your trainer will also be your supervisor or manager.

He/She is there to support you and show you the correct way to do
things. Ask for help.
 Your trainer will tell you about the important things you need to consider
when you are completing the activities and it is important that you listen
and take notes.
 You will be given plenty of opportunities to ask questions and practice on

the job. Make sure you practice your new skills during regular work
shifts. This way you will improve both your speed and memory and also
your confidence.
 Talk to more experienced work mates and ask for their guidance.
 Use self-check questions at the end of each section to test your own
progress.
 When you are ready, ask your trainer to watch you perform the activities
outlined in this module.
 As you work through the activities, ask for written feedback on your
progress. Your trainer keeps feedback/pre-assessment reports for this
reason. When you have completed this learning material and feel
confident that you have had sufficient knowledge and skills, your trainer
will arrange an appointment with a registered assessor to assess you.
The results of the assessment will be recorded in your Competency
Achievement Record.

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LIST OF COMPETENCIES
No. Unit of Competency Module Title Code

BASIC COMPETENCIES
Lead workplace communication Leading workplace 500311109

1
communication
Lead small team 500311110

2 Leading small team
Develop and practice Developing and practice 500311111

3 negotiation skills negotiation skills
Solve problems related to work Solving problems related to 500311112

4 activities work activities
Use mathematical concepts Using mathematical 500311113

5 and techniques concepts and techniques
Use relevant technologies Using relevant 500311114

6
technologies
COMMON COMPETENCIES
Apply quality standards HCS315202

1 Applying quality standards
Perform computer operations Performing computer HCS311201

2
operations
Maintain an effective Maintaining an effective

relationship with clients and HCS913201
3 relationship with clients
customers and customers
Manage own performance Managing own HCS913202

4
performance
CORE COMPETENCIES

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Journalize transactions HCS412301
1. Journalizing Transactions
Post transactions HCS412302

2. Posting Transactions
Prepare trial balance HCS412303

3. Preparing Trial Balance
Prepare financial reports Preparing Financial HCS412304

4.
Reports
Review internal control system Reviewing Internal Control HCS412305

5.
System

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MODULE CONTENT
Qualification: Bookkeeping NC III
Unit of Competency: Journalize Transactions
Module Title: Journalizing Transactions
Nominal Duration: 120 Hours
Introduction:
This module is designed to cover the knowledge, skills, and attitudes

for Journalizing Transactions in accordance with industry practice and
generally accepted accounting principles/Philippine Financial Reporting
Standards. It will provide an in-depth discussion on the nature of
accounting as well as the business organization.
Learning Outcomes:
Upon completion of this module, you must be able to:
1 Prepare chart of accounts
2 Analyze documents
3 Prepare journal entry
Assessment Criteria:
LO 1 Prepare chart of accounts
1. Nature of business is determined based on client information
2. List of asset, liability, equity, income, and expense account titles
are prepared in accordance with industry practices
3. Accounting manual is prepared in accordance with industry practice
LO 2 Analyze documents
1. Documents are gathered, checked and verified in accordance with
verification and validation processes
2. Account titles are selected in accordance with standard selection
processes
LO 3 Prepare journal entry
1. Journals are prepared in accordance with industry practice and
generally accepted accounting principles/Philippine Financial
Reporting Standards for transactions and events.
2. Debit account titles are determined in accordance with chart of
accounts
3. Credit account titles are determined in accordance with chart of
accounts

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4. Explanation to journal entry is prepared in accordance with the
nature of transaction
5. Journal entries are prepared with 100% accuracy

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LEARNING OUTCOME SUMMARY
Learning Outcome 1 Prepare chart of accounts
CONTENTS:
1. Nature of business and accounting
2. Introduction to Chart of Accounts
3. Preparation of Chart of Accounts
ASSESMENT CRITERIA:
1. Nature of business is determined based on client information

2. List of asset, liability, equity, income, and expense account titles
are prepared in accordance with industry practices
3. Accounting manual is prepared in accordance with industry practice
CONDITION:
Students/ Trainees must be provided with the following:
1. Workplace: real or simulated work area
2. Appropriate tools and equipment, Computer, LCD Projector and Screen
3. Materials/supplies relevant to the activity, Journal Book
4. Training Materials
Competency Based Learning Materials
Competency Standards
Training Regulations
Competency Based Curriculum
Labels
ASSESMENT METHOD:
1. Written Examination
2. Work Related Project
3. Questioning

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Learning Experiences
Learning Outcome 1: Prepare chart of accounts
Learning Activities Special Instructions
Information Sheet 1.1-1
Read Information Sheet 1.1-1 Read and understand the information

Accounting and Its Environment sheet and all related books on the nature
of business. You may also download and
read from the internet related topics.
Self-Check 1.1-1
Do: Self Check Answer the Questions carefully and cross

Check your work with the Answers Key check your answers with the Answer key
prepared. You must answer the
questions correctly before proceeding to
the next activity.

Typical Account Titles Used sheet and all related books on the nature
Self-Check 1.1-2

the next activity.
Read and understand the information
Read Information Sheet 1.1-3 sheet and all related books on the nature
Introduction to Chart of Accounts of business. You may also download and

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Perform Task Sheet No. 1.1-1 Task Sheet will help you practice your
skills.
The Performance Criteria Checklist will
guide and help you evaluate your work as
you are practicing your skills.
Evaluate your own work using the
Performance Criteria. When you are
ready present your work to your trainer
for final evaluation and recording.
After doing all activities of this LO, you
are ready to proceed to the next LO on
Analyzing Documents.

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INFORMATION SHEET 1.1-1
Accounting and Its Environment
Learning Objective:
After reading this information sheet, the student must be able
to define and understand the meaning of accounting, bookkeeping and
business; identify and describe the types of business organizations and the
activities performed by each organization.
ACCOUNTING
 It is a service entity. Its function is to provide quantitative
information, primarily financial in nature, about economic entities
that is intended to be useful in making economic decisions.
 It is the process of identifying, measuring and communicating
economic information to permit informed judgments and decisions by
users of the information.
 It is the art of recording, classifying and summarizing in a
significant manner and in terms of money, transactions and events
which are, in part at least, of a financial character, and interpreting
the results thereof.
FORMS OF BUSINESS ORGANIZATIONS

 Sole Proprietorship. This has a single owner called the proprietor.
This tends to be small service-type businesses and retail
establishments. The owner receives all profits, absorbs all losses
and is solely responsible for all debts of the business.
 Partnership. It is a business owned and operated by two or more
persons who bind themselves to contribute money, property or
industry to a common fund, with the intention of dividing the
profits themselves.
 Corporation. It is an artificial being created by operation of law,
having the rights of succession and the powers, attributes and
properties expressly authorized by law or incident to its existence.
ACTIVITIES PERFORMED BY BUSINESS ORGANIZATIONS

 Service companies performed service for a fee (e.g. law firms,
accounting and audit firms, stock brokerage, beauty salons and
recruitment agencies).

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 Merchandising companies purchase goods that are ready for sale
and then sell these to customers.
 Manufacturing companies buy raw materials, convert them into
products and then sell the products to other companies or to final
consumers.
FUNDAMENTAL CONCEPTS
 Entity Concept. It is the most basic concept in accounting. An

accounting entity is an organization or a section of an organization
that stands apart from other organizations and individuals as a
separate economic unit.
 Periodicity Concept. An entity’s life can be meaningfully
subdivided into equal time periods for reporting purposes. This
concept allows the users to obtain timely information to serve as a
basis on making decisions about future activities.
 Stable Monetary Unit Concept . The Philippine Peso is a reasonable
unit of measure and that its purchasing power is relatively stable.
BASIC PRINCIPLES
 Objectivity Principle. Accounting records and statements are
based on the most reliable data available so that they will be as
accurate and as useful as possible. Reliable data are verifiable
when independent observers can confirm them.
 Historical Cost. This principle states that acquired assets should
be recorded at their actual cost and not at what management
thinks they are worth as at reporting date.
 Revenue Recognition Principle. Revenue is to be recognized in the
accounting period when goods are delivered or services are
rendered or performed.
 Expense Recognition Principle. Expenses should be recognized in
the accounting period in which goods and services are used up to
produce revenue and not when the entity pays for those goods and
services.
 Adequate Disclosure. Requires that all relevant information that
would affect the user’s understanding and assessment of the
accounting entity be disclosed in the financial statements.
 Materiality. Financial reporting is only concerned with information
that is significant enough to affect evaluations and decisions.

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 Consistency Principle. The firms should use the same accounting
method from period to period to achieve comparability over time
within a single enterprise.
SPECIALIZED ACCOUNTING SERVICES

 Auditing. Is the independent examination that ensures the
fairness and reliability of the reports that management submits to
users outside the business entity.
 Cost Accounting. Deals with the collection, allocation and control
of the cost of producing specific goods and services.
 Financial Accounting. Is focused on the recording of business
transactions and the periodic preparation of reports on financial
position and results of operations. Financial accountants accord
importance to generally accepted accounting principles.
 Internal Auditing. Is concerned with the examination of the
information system, records and operations of the entity to ensure
the effectiveness and efficiency of operations and the integrity of
records.
 Government Accounting. Is concerned with the identification of the
sources and uses of resources consistent with the provisions of
city, municipal, provincial and national laws.
 Tax Accounting. Includes the preparation of tax returns and the
consideration of the tax consequences of proposed business
transactions or alternative courses of action.
 Management Consulting. Is the catchall term that describes the
wide scope of advice CPAs provide to the business. Services
provided include advice on mergers and takeovers, installation or
modification of accounting systems, financial planning models,
inventory control systems.
 International Accounting. Addresses the special problems
associated with the international trade of multinational business
organizations.
USERS AND THEIR INFORMATION NEEDS
 Investors. They need information to help them determine whether

they should buy, hold or sell. Stockholders are also interested in
information which enables them to assess the ability of the
enterprise to pay dividends.
 Employees. They are interested in information which enables them
to assess the ability of the enterprise to provide remuneration,
retirement benefits and employment opportunities.

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 Lenders. They are interested in information which enables them
to determine whether their loans and interest thereon will be paid
when due.
 Suppliers and other trade creditors. These users are interested in
information which enables them to determine whether amounts
owing to them will be paid on maturity.
 Customers. Customers have an interest in information about the
continuance of an enterprise especially when they have a long-term
involvement with or are dependent on the enterprise.
 Government and their agencies. These users require information
to regulate the activities of the enterprise, determine taxation
policies and as a basis for national income and similar statistics.
 Public. Financial statements may assist the public by providing
information about the trends and recent developments in the
prosperity of the enterprise and the range of its activities.

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SELF-CHECK 1.1-1
A. TRUE or FALSE.
1. Accounting information may not be supported by independent,
unbiased evidence.
2. Trading or merchandising differs from a manufacturing in that the
former renders services for profit.
3. A corporation is legal entity, organized by operations of law.
4. Manufacturing is converting raw materials into finding products.
5. Knowledge of accounting is very useful for the accountant only and
not to anybody who is engaged or interested in business.
6. Governmental bodies or agency uses accounting information to
assist them whether to extend credit or not.
7. Trading or merchandising is a business that deals with buying and
selling of the same goods in the same form for profit.
B. Identification.
8. The owners in a business organized by the operation of law.
9. Nature of business activities which renders services to the
customers for a fee to generate income.
10. It is the governing body of the corporation.
C. Enumeration.
1. Give the three (3) business organizations.
2. What are the three activities performed by business organizations?
3. Who are the seven (7) users of accounting information?

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ANSWER KEY 1.1-1
A.
1. False
2. False
3. True
4. False
5. False
6. False
7. True
B.
8. Stockholder
9. Servicing
10. Board of Directors
C.
1. Single Proprietorship, Partnership, Corporation
2. Merchandising, Servicing, Merchandising
3.
a. Owner
b. Creditor / Lender
c. Government and its Agencies
d. Suppliers
e. Customers
f. Public
g. Employees

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TYPICAL ACCOUNT TITLES USED
Learning Objective:
to identify and describe the different account titles used in accounting; and
classify each account according to accounting elements
BALANCE SHEET
I. Assets – is a resource controlled by the enterprise as a result of past
events and from which future economic benefits are expected to flow
to the enterprise.
 Current Assets:
a. is expected to be realized in, or is held for sale or consumption
in, the normal course of the enterprise’s operating cycle; or
b. is held primarily for trading purposes or for the short-term and
expected to be realized within twelve months of the balance
sheet date; or
c. is cash or a cash equivalent asset which is not restricted in its
use.
Examples:
1. Cash – Is any medium of exchange that a bank will accept
for deposit at face value. It includes coins, currency, checks,
money order, bank deposits and drafts.
2. Notes Receivable – it is a written pledge that a customer
will pay the business a fixed amount of money on a certain
date.
3. Accounts Receivable – These are claims against customers
arising from sale of services or goods on credit.
4. Inventories – these are assets, which are (1) held for sale in
the ordinary course of business; (2) in the process of
production for such sale; (3) in the form of materials or
supplies to be consumed in the production process or in the
rendering of services.
5. Prepaid Expenses – These are expenses paid for by the
business in advance. It is an asset because the business
avoids having to pay cash in the future for a specific
expense. These prepaid items represent future economic
benefits – assets – until the time these start to contribute to
the earning process; these, then, become expenses.

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Non-current Asset
- all other assets not under the current asset
should be classified to non-current assets.
Examples:
1. Property, Plant and Equipment – these are tangible assets
that are held by an enterprise for use in the production or
supply of goods or services, or for rental to others, or for
administrative purposes and which are expected to be used
during more than one period.
2. Accumulated Depreciation – It is a contra account that
contains the sum of the periodic depreciation charges. The
balance of this account is deducted from the cost of the
related asset to obtain book value.
3. Intangible Assets – these are identifiable, non-monetary
assets without physical substance held for use in the
production or supply of goods or services, for rental to
others, or for administrative purposes. These include
goodwill, patents, copyrights, licenses, franchises,
trademarks, secret processes, subscription lists and non-
competition agreement.
II. Liabilities – is a present obligation of the enterprise arising from past

events, the settlement of which is expected to result in an outflow
from the enterprise of resources embodying economic benefits.
Current Liability:
a. is expected to be settled in the normal course of the enterprise’s
operating cycle; or
b. is due to be settled within twelve months of the balance sheet
date.
Examples:
1. Accounts Payable – This account represents the reverse
relationship of the accounts receivable. By accepting the
goods or services, the buyer agrees to pay for them in the
near future.
2. Notes Payable – This is like a note receivable but in a
reverse sense, the business entity is the maker of the note;
that is, the entity is the party who promises to pay the other
party a specified amount of money on a specified future date.
3. Accrued Liabilities – Amounts owed to others for unpaid
expenses. This account includes, salaries payable, utilities
payable, interest payable and taxes payable.
4. Unearned Revenues – This happens when the business
entity receives payment before providing its customers with
goods or services.

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* Non-current Liability: all other liabilities that can’t be classified in
the current liabilities.
Examples:
1. Mortgage Payable – This account records long-term debt
of the business entity for which the business entity has
pledged certain assets as security to the creditor.
2. Bonds Payable – Business organizations often obtain
substantial sums of money from lenders to finance the
acquisition of equipment and other needed assets. The
bond is a contract between the issuer and the lender
specifying the terms of repayment and the interest to be
charged.
III. Owner’s Equity – Is the residual interest in the assets of the

enterprise after deducting all its liabilities.
 Capital – This account is used to record the original and additional

investments of the owner of the business entity. It is increased by the
amount of net income earned during the year or is decreased by a net
loss. Cash or other assets that the owner may withdraw from the
business ultimately decrease it. This account title bears the name of
the owner.
 Withdrawals – When the owner of a business entity withdraws cash
or other assets, such are recorded in the drawing or withdrawal
account rather than directly reducing the owner’s equity account.
 Income Summary – it is a temporary account used at the end of the
accounting period to close income and expenses. This account shows
the net income or net loss for the period before closing to the capital
account.
INCOME STATEMENT
I. Income – Is increases in economic benefits during the accounting
period in the form of inflows or enhancements of assets or decreases of
liabilities that result in increases of equity, other than those relating to
contributions from equity participants.
 Service Income – Revenues earned by performing services for a

customer or client.
 Sales – Revenues earned as a result of sale of merchandise.

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II. Expenses – Are decreases in economic benefits during the accounting
period in the form of outflows or depletions of assets or incurrence of
liabilities that result in decreases of equity, other than those relating to
distributions to equity participants.
 Cost of Sales – The cost incurred to purchase or to produce the

products sold to customers during the period; also called Cost of
Goods Sold.
 Salaries or Wages Expenses – Includes all payments as a result of an
employer-employee relationship.
 Utilities Expense – Expenses related to use of telecommunications
facilities, consumption of electricity, fuel and water.
 Rent Expense – Expenses for space, equipment or other asset rentals.
 Supplies Expense – Expenses of using supplies in the conduct of
daily operations.
 Insurance Expense – Portion of premiums paid on insurance
coverage which has expired.
 Depreciation Expense – The portion of the cost of a tangible asset
allocated or charged as expense during an accounting period.
 Uncollectible Accounts Expense – The amount of receivables
estimated to be doubtful of collection and charged as expense during
an accounting period.
 Interest Expense – An expense related to use of borrowed funds.

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SELF-CHECK 1.1-2
Classify the following account titles. Write (A) FOR ASSETS, (L) for LIABILITIES,
( OE ) for OWNER’S EQUITY, (I) for INCOME and (E) for EXPENSE.
1 Repairs and Maintenance 16 Taxes and licenses

2 Margie Landocio, Capital 17 Land
3 Unused Office Supplies 18 Commission Income
1
4 Cash on Hand 9 Interest Expense
2
5 Notes receivable 0 Prepaid Rent
2
6 Accounts payable 1 Notes Payable
7 Margie Landocio, Drawing 22 Furniture and Fixtures
8 Transportation equipment 23 Building
2
9 Accounts receivable 4 Interest Income
2
10 Delivery Equipment 5 Office Supplies
2
11 Petty Cash Fund 6 Tools
12 Unearned Interest Income 27 Rent Expense
2
13 Shop Supplies Used 8 Retainer Fees Income
14 Advances to employees 29 Prepaid Insurance
15 Postage and Documentations 30 Insurance Expense

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ANSWER KEY 1.1-2
1. Expense 16. Expense

2. Owner’s Equity 17. Asset
3. Asset 18. Income
4. Asset 19. Expense
5. Asset 20. Asset
6. Liability 21. Liability
7. Owner’s Equity 22. Asset
8. Asset 23. Asset
9. Asset 24. Income
10. Asset 25. Asset
11. Asset 26. Asset
12. Liability 27. Expense
13. Expense 28. Income
14. Asset 29. Asset
15. Expense 30. Expense

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INTRODUCTION TO CHART OF ACCOUNTS
Learning Objective:
to prepare a Chart of Account for a certain company using the correct
format.
Chart of accounts is a listing of all the accounts in the general ledger,

each account accompanied by a reference number. To set up a chart of
accounts, one first needs to define the various accounts to be used by the
business. Each account should have a number to identify it. For very small
businesses, three digits may suffice for the account number, though more
digits are highly desirable in order to allow for new accounts to be added as
the business grows. With more digits, new accounts can be added while
maintaining the logical order. Complex businesses may have thousands of
accounts and require longer account reference numbers. It is worthwhile to
put thought into assigning the account numbers in a logical way, and to
follow any specific industry standards. An example of how the digits might
be coded is shown in this list:
Account Numbering
1000 - 1999: asset accounts

2000 - 2999: liability accounts
3000 - 3999: equity accounts
4000 - 4999: revenue accounts
5000 - 5999: cost of goods sold
6000 - 6999: expense accounts
7000 - 7999: other revenue (for example, interest income)
8000 - 8999: other expense (for example, income taxes)

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By separating each account by several numbers, many new accounts can be
added between any two while maintaining the logical order.
Defining Accounts
Different types of businesses will have different accounts. For example, to

report the cost of goods sold a manufacturing business will have accounts
for its various manufacturing costs whereas a retailer will have accounts for
the purchase of its stock merchandise. Many industry associations publish
recommended charts of accounts for their respective industries in order to
establish a consistent standard of comparison among firms in their
industry. Accounting software packages often come with a selection of
predefined account charts for various types of businesses.
There is a trade-off between simplicity and the ability to make historical

comparisons. Initially keeping the number of accounts to a minimum has
the advantage of making the accounting system simple. Starting with a
small number of accounts, as certain accounts acquired significant balances
they would be split into smaller, more specific accounts. However, following
this strategy makes it more difficult to generate consistent historical
comparisons. For example, if the accounting system is set up with a
miscellaneous expense account that later is broken into more detailed
accounts, it then would be difficult to compare those detailed expenses with
past expenses of the same type. In this respect, there is an advantage in
organizing the chart of accounts with a higher initial level of detail.
Some accounts must be included due to tax reporting requirements. For

example, in the U.S. the IRS requires that travel, entertainment, advertising,
and several other expenses be tracked in individual accounts. One should
check the appropriate tax regulations and generate a complete list of such
required accounts.
Other accounts should be set up according to vendor. If the business has

more than one checking account, for example, the chart of accounts might
include an account for each of them.
Account Order
Balance sheet accounts tend to follow a standard that lists the most liquid
assets first. Revenue and expense accounts tend to follow the standard of
first listing the items most closely related to the operations of the business.
For example, sales would be listed before non-operating income. In some
cases, part or all of the expense accounts simply are listed in alphabetical
order.

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Sample Chart of Accounts
The following is an example of some of the accounts that might be included

in a chart of accounts.
Asset Accounts
Current Assets
1000 Petty Cash

1010 Cash on Hand (e.g. in cash registers)
1020 Regular Checking Account
1030 Payroll Checking Account
1040 Savings Account
1050 Special Account
1060 Investments - Money Market
1070 Investments - Certificates of Deposit
1100 Accounts Receivable
1140 Other Receivables
1150 Allowance for Doubtful Accounts
1200 Raw Materials Inventory
1205 Supplies Inventory
1210 Work in Progress Inventory
1215 Finished Goods Inventory - Product #1
1400 Prepaid Expenses
1410 Employee Advances
1420 Notes Receivable - Current
1430 Prepaid Interest
1470 Other Current Assets
Fixed Assets

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1500 Furniture and Fixtures
1510 Equipment
1520 Vehicles
1530 Other Depreciable Property
1540 Leasehold Improvements
1550 Buildings
1560 Building Improvements
1690 Land
1700 Accumulated Depreciation, Furniture and Fixtures
1710 Accumulated Depreciation, Equipment
1720 Accumulated Depreciation, Vehicles
1730 Accumulated Depreciation, Other
1740 Accumulated Depreciation, Leasehold
1750 Accumulated Depreciation, Buildings
1760 Accumulated Depreciation, Building Improvements
Other Assets
1900 Deposits
1910 Organization Costs
1915 Accumulated Amortization, Organization Costs
1920 Notes Receivable, Non-current
1990 Other Non-current Assets
Liability Accounts
Current Liabilities
2000 Accounts Payable

2300 Accrued Expenses
2310 Sales Tax Payable
2320 Wages Payable
2330 401-K Deductions Payable

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2335 Health Insurance Payable
2340 Federal Payroll Taxes Payable
2350 FUTA Tax Payable
2360 State Payroll Taxes Payable
2370 SUTA Payable
2380 Local Payroll Taxes Payable
2390 Income Taxes Payable
2400 Other Taxes Payable
2410 Employee Benefits Payable
2420 Current Portion of Long-term Debt
2440 Deposits from Customers
2480 Other Current Liabilities
Long-term Liabilities
2700 Notes Payable

2702 Land Payable
2704 Equipment Payable
2706 Vehicles Payable
2708 Bank Loans Payable
2710 Deferred Revenue
2740 Other Long-term Liabilities
Equity Accounts
3010 Stated Capital

3020 Capital Surplus
3030 Retained Earnings
Revenue Accounts
4000 Product #1 Sales

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4060 Interest Income
4080 Other Income
4540 Finance Charge Income
4550 Shipping Charges Reimbursed
4800 Sales Returns and Allowances
4900 Sales Discounts
Cost of Goods Sold
5000 Product #1 Cost

5050 Raw Material Purchases
5100 Direct Labor Costs
5150 Indirect Labor Costs
5200 Heat and Power
5250 Commissions
5300 Miscellaneous Factory Costs
5700 Cost of Goods Sold, Salaries and Wages
5730 Cost of Goods Sold, Contract Labor
5750 Cost of Goods Sold, Freight
5800 Cost of Goods Sold, Other
5850 Inventory Adjustments
5900 Purchase Returns and Allowances
5950 Purchase Discounts
Expenses
6000 Default Purchase Expense

6010 Advertising Expense
6050 Amortization Expense

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6100 Auto Expenses
6150 Bad Debt Expense
6200 Bank Fees
6250 Cash Over and Short
6300 Charitable Contributions Expense
6350 Commissions and Fees Expense
6400 Depreciation Expense
6450 Dues and Subscriptions Expense
6500 Employee Benefit Expense, Health Insurance
6510 Employee Benefit Expense, Pension Plans
6520 Employee Benefit Expense, Profit Sharing Plan
6530 Employee Benefit Expense, Other
6550 Freight Expense
6600 Gifts Expense
6650 Income Tax Expense, Federal
6660 Income Tax Expense, State
6670 Income Tax Expense, Local
6700 Insurance Expense, Product Liability
6710 Insurance Expense, Vehicle
6750 Interest Expense
6800 Laundry and Dry Cleaning Expense
6850 Legal and Professional Expense
6900 Licenses Expense
6950 Loss on NSF Checks
7000 Maintenance Expense
7050 Meals and Entertainment Expense
7100 Office Expense
7200 Payroll Tax Expense
7250 Penalties and Fines Expense
7300 Other Taxes
7350 Postage Expense
7400 Rent or Lease Expense
7450 Repair and Maintenance Expense, Office

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7460 Repair and Maintenance Expense, Vehicle
7550 Supplies Expense, Office
7600 Telephone Expense
7620 Training Expense
7650 Travel Expense
7700 Salaries Expense, Officers
7750 Wages Expense
7800 Utilities Expense
8900 Other Expense
9000 Gain/Loss on Sale of Assets
How to Set Up a Chart of Accounts
Set up a chart of accounts as one of the first steps in beginning a

new business. A chart of accounts is the listing of all the accounts in
a general ledger, and it usually includes reference numbers to help
classify the accounts by type. The chart organizes and tracks all of
the business activities and makes it possible to generate reports in a
logical sequence to track the financial history and progress of the
business. Here's how to set up a basic chart of accounts.
Instructions
1. Organize the business by classifying the items into what the business
owns (assets), what the business owes (liabilities), the value of the
business to the owners (equity), business income (revenues) and what
the business spends to provide the income (expenses.)
2. Give each asset account a unique name, such as cash-checking, cash-
savings, accounts receivable, inventory, investments and fixed (or
depreciable) assets. Assign sequential numbers to these accounts
from 1000 to 1999. The range of the account numbers allows the
addition of new account names and numbers as the business
expands.
3. Name each liability account with a unique name, such as accounts
payable, notes payable, loans payable, wages payable, and payroll
taxes payable to track any amounts the business owes to others.
These may be further divided into short term liabilities (amounts due
to be paid within one business year or less) and long term liabilities

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(amounts due to be paid later than one business year). Assign
sequential numbers to these accounts from 2000 to 2999.
4. Classify each equity account with a unique name. These include
common stock, paid-in capital and retained earnings (if the business
is a corporation) partner distributions and partners' equity (if it's a
partnership), and members' equity (if it's an LLC). Assign sequential
numbers to these accounts from 3000 to 3999.
5. Assign unique names to each revenue account, such as sales,
commission income, rent income and other income. Assign account
numbers from 4000 to 4999 to these accounts. Revenue accounts
track all the income the business brings in during the year.
6. Determine all of the costs of doing business within one business year.
These are the expenses of the business, and they are segregated
according how they are related to the production of income. For
example, cost of goods sold accounts relate to manufacturing
products, producing services and purchasing inventory. Number these
accounts from 5000 to 5999. General expenses, including office
expenses, advertising, accounting and legal expenses get numbers
from 6000 to 6999, and wages and payroll expenses get numbers from
7000 to 7999.
7. Segregate any revenue and expenses which are not part of the normal
course of the company's main business. This category might include
Income from such activities as interest income from notes receivable
or gain or loss from the sale of business assets. Similarly, there may
be expenses that are not related to the production of the company's
products or services, such as income tax expense or mortgage
expense. Number these accounts 8000 to 8999.
TASK SHEET 1.1-1

Title: Prepare Chart of Accounts
Performance Objective: Given the necessary supplies and

materials needed, you should be able to prepare
a completed Chart of Accounts in accordance
with the generally accepted accounting
principles.
Supplies/Materials : Bond Paper
Equipment : Computer and Printer with Ink
Steps/Procedure:

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1. Prepare the Heading starting with Name of the Company.
2. Identify the account titles to be used.
3. Classify the account titles according to ASSET, LIABILITIES,
OWNER’S EQUITY, INCOME and EXPENSE.
4. Assign a three (3) digit Account Number for each account title
starting with 1 – Assets, 2 – Liabilities, 3 – Owner’s Equity, 4 –
Income and 5 – Expense.
5. Print the document / Report.
6. Present your work to your trainer.
Assessment Method:
Performance Criteria Checklist.
Performance Criteria Checklist 1.1-1
Name: __________________________
CRITERIA
Did you…. YES NO
1. Prepare the heading for the report?
2. Identify the Account Titles Used?
3. Classify the account titles according to categories?
4. Assign a three (3) digit Account Number to each
Account Title?
5. Print the document?
Recommendations / Suggestions:

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___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
________
Checked by:
MR. CARY P. JAUCIAN

Trainer
Learning Outcome 2 Analyze documents
CONTENTS:
1. Identification of Source Documents
2. Understanding the Rules of Debit and Credit
3. Analyzing Business Transactions
ASSESMENT CRITERIA:
1. Documents are gathered, checked and verified in accordance with
verification and validation processes

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2. Account titles are selected in accordance with standard selection
processes
CONDITION:
Labels
ASSESMENT METHOD:
3. Questioning
Learning Outcome 2: Analyze documents

Accounting Source Documents sheet and all related books on the nature
Self-Check 1.2-1

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the next activity.

Rules on Debit and Credit sheet and all related books on the nature
Self-Check 1.2-2

the next activity.

Introduction to Transaction Analysis: The sheet and all related books on the nature
Basic Accounting Equation of business. You may also download and
Self-Check 1.2-3 Answer the Questions carefully and cross

check your answers with the Answer key
Do: Self Check prepared.
Check your work with the Answers Key

Preparing Journal Entries.

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ACCOUNTING SOURCE DOCUMENTS
Learning Objective:
to identify and describe various accounting source documents and define its
uses.
What are source documents in accounting?
Source documents is an accounting terms to describe the original

records that contain the details that substantiate the financial transactions
that are entered into the internal accounting system of a business. Typical
source documents include sales invoices, cash receipts, cash register slip,
credit notes and deposit slip. Source documents provide the documentary
evidence of a business deal or accounting event and are a critical part of an
audit trail that establishes the authenticity and tracking history of an
accounting system's financial records.
'Source documents' in accounting

Background to 'source documents' in accounting.
All manufacturing systems are identified by their three key elements:
inputs, processes and outputs. Accounting manufactures outputs in the
form of financial statement and financial reports for business decision
makers. It engages a process known as the double-entry bookkeeping
system to accurately capture and categorize inputs so that they can produce
meaningful reports. The accounting process relies on inputs in the form of
data taken from source documents that are generated whenever financial
transactions occur.
Accounting Information System

So, source documents then are the essential inputs that provide the
details required by internal accounting systems. They also assist in the
internal control of the resources of the business. Source documents ensure
that there is documentary evidence to support the purchase or sale of items
of value and the receipt and payment of money. Source documents provide
the evidence or proof that a transaction has actually occurred which makes
it difficult for people to misappropriate or steal cash or other resource items
from the business. These source documents are also required by both
company and tax auditors.

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The details from the source document should be recorded in the
appropriate accounting journal as soon as possible after the transaction has
occurred. After recording, all source documents should be filed away in a
document system where they can be retrieved at a later date if required.
Government tax law requires that these source documents are kept for a
number of years (typically from 3-7years depending on the country). In the
event of an audit, these source documents should support the data recorded
in the accounting journals and the general ledger by providing an
indisputable audit trail from source documents to journals to general ledger
to trial balance to financial statement.
In summary then, accounting source documents are required for:

1. Providing details of transactions to input into the internal accounting
system on a month-to-month basis
2. Providing evidence of the transactions recorded in the accounting
system in the event of a end-of-year financial audit
3. Satisfying the requirements of the tax law in regard to proof of income
and expenditure.
Information contained in a source document

A source document should describe all the key aspects of the transaction
such as:
 the names and addresses of the entity buying/selling the
good/services
 the date when the transaction occurred
 the amount of the transaction
 the amount of any taxes
 the nature and purpose of the transaction (i.e. descriptions)
 the special terms and conditions of the transaction (i.e. discount,
payment and delivery details)
 authorized signature for payment or acceptance of goods/services
Common source documents

Source documents are generally related to the particular activity as shown
in the table below:
Source documents
Business Activity
Cash receipt (copy), cash register
Cash received by the business
tapes, bank statement, bank deposit
slip
Cash paid by the business Check butt, ATM or EFTPOS receipt,
bank statement, payroll records,

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cancelled check
Petty cash payments

Petty cash Voucher, cash receipts
Business invoice (copy), Business
Business giving credit to customer
credit/debit note
Supplier's original invoice, supplier's

Business receiving credit from a statement, Supplier's debit/credit
supplier note, credit
card statement and receipts
Any activity not generating a Memorandum

document
A description of the source documents is provided below:

 Sales invoice - used to record the goods/services details and the
amount owing to the business by a customer. The original goes to the
customer with the copy held by the business.
 Purchase invoices - used to record the goods/services details and the
amount owing by the business to suppliers. The original is provided
by the supplier to the business.
 Credit Note - used by a business/supplier to correct an overcharge in
the invoice
 Debit Note - used by a business/supplier to correct an undercharge in
the invoice
 Petty cash voucher - used as evidence of cash payment to another
party
 Check butt/stubs - used to record the amount paid on a particular
numbered check to the payee.
 Cash receipts - used to acknowledge money received from customers
and cash paid to suppliers.
 Bank statement - used as a summary of cash movements through the
business bank account.
 Memorandum - used as a note explaining a transaction if no other
documents exists.
 ATM receipts - used as evidence that money was taken from the
business bank account via the ATM
 EFTPOS receipts - used as evidence of a purchase from a supplier
using the EFTPOS system.
 Supplier’s Statements - issued by suppliers in regard to invoices
unpaid at a particular date

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 Cash Register tapes - automatically generated by the cash register and
provides an unbroken sequence of cash transactions and events
 Bank Deposit slips/forms - used to record the bankings deposited to
the bank.
 The original is provided to the bank with the copy retained by the
business.
 Credit Card receipts - used to verify transactions on credit card
statements that relate to the business.
 Payroll Records - used to verify payments made to employees in the
form of salaries and wages and includes timesheets.
 Canceled check - used as an internal control to ensure that all checks
can be accounted for.

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SELF-CHECK 1.2-1
Instruction: The following are descriptions referring to accounting

source documents. Provide the exact term that is being described by each
item.
1. It is used to verify transactions on credit card statements that relate

to the business.
2. It is used as a summary of cash movements through the business
bank account.
3. It is used as evidence of cash payment to another party
4. It is used as a note explaining a transaction if no other documents
exists.
5. It is used as an internal control to ensure that all checks can be
accounted for.
6. It is used to record the goods/services details and the amount owing
to the business by a customer. The original goes to the customer with
the copy held by the business.
7. It is used by a business/supplier to correct an undercharge in the
invoice.
8. It is issued by suppliers in regard to invoices unpaid at a particular
date.
9. It is used to record the goods/services details and the amount owing
by the business to suppliers. The original is provided by the supplier
to the business.
10. It is used by a business/supplier to correct an overcharge in the
invoice.

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ANSWER KEY 1.2-1
1. Credit Card Receipts

2. Bank Statement
3. Petty Cash Voucher
4. Memorandum
5. Canceled Check
6. Sales Invoice
7. Debit Note
8. Supplier’s Statement
9. Purchase Invoice
10. Credit Note

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Rules on Debit and Credit
Learning Objective:
to understand, identify and analyze the use of the different rules of Debit
and Credit.
First, let us recall the definition of an "account". An account is a

storage unit that stores similar items or transactions.
Examples of accounts are: Cash, Accounts Receivable, Office

Equipment, Accounts Payable, Service Income, Rent Expense, and so on.
Let's take Cash, for instance. The Cash account stores all transactions that
involve cash, i.e. cash receipts and cash disbursements.
Second, let us define "debit" and "credit". Debit means left and credit
means right. Do not associate any of them with plus or minus. Debit simply
means left and credit means right – that's just it! "Debit" is abbreviated as
"Dr." and "credit", "Cr.".
The terms originated from the Latin terms "debere" or "debitum" which
means "what is due"; and "credere" or "creditum" which means "something
entrusted or loaned".
And third, we define what we call "normal balance". Each account has
a debit and a credit side. You could picture that as a big letter T, hence the
term "T-account". Again, debit on the left side and credit on the right. Normal
balance is the side where the balance of the account is normally found.
Asset accounts normally have debit balances, while liabilities and

capital normally have credit balances. Income, since it increases capital has
a normal credit balance. On the other hand, expenses have normal debit
balance since they decrease capital. Withdrawals also have a normal debit
balance.
Now what is the significance of the "normal balance"?
When you place an amount on the normal balance side, you are
increasing that account. If you put an amount on the opposite side, you are
decreasing the account. Therefore, to increase an asset, you debit it. To

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decrease an asset, you credit it. To increase liability and capital accounts,
credit. To decrease them, debit.
For Example
Let us take Cash. Cash is an asset account. Again, asset accounts

normally have debit balances. Therefore, to increase Cash you debit it. To
decrease Cash, you credit it.
For another example, let's take Accounts Payable. It is a liability

account. Liability accounts normally have credit balances. Thus, if you want
to increase Accounts Payable, you credit it. If you want to decrease Accounts
Payable, you debit it.
And the same rule applies to all asset, liability, and capital accounts.
To sum that up, here's a table summarizing the normal balances of the accounting
elements, and the actions to increase or decrease them. Notice that the normal balance is the
same as the action to increase the account.
Accounting Normal
To Increase To Decrease
Element Balance
1. Assets Debit Debit Credit
2. Liabilities Credit Credit Debit
3. Capital Credit Credit Debit
4. Withdrawal Debit Debit Credit
5. Income Credit Credit Debit
6. Expense Debit Debit Credit
Tip: You don't need to memorize the whole table. Just be familiar with the
normal balance portion and you'll be okay. The normal balance is the same
as the action to increase the account. The action to decrease the account is
simply the opposite of that.

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Self – Check 1.2-2
Instruction: For each of the following items, identify whether the account is
DEBIT or CREDIT.
1. To increase Office Equipment, debit or credit?

2. To increase Rent Payable.
3. To record/increase Rent Expense.
4. To decrease Accounts Payable.
5. To record/increase Service Revenue.
6. To decrease Cash.
7. To record/increase Loss from Fire.
8. To decrease Delivery Equipment.
9. To increase Accumulated Depreciation

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Answer Key 1.2-2
Answers: 1. Debit; 2. Credit; 3. Debit; 4. Debit; 5. Credit; 6. Credit; 7. Debit;

8. Credit.
And oops! What about item #9? How do you increase Accumulated
Depreciation? It is a contra-asset account (deducted from an asset account).
For contra-asset accounts, the rule is simply the opposite of the rule for
assets. Therefore, to increase Accumulated Depreciation, you credit it.
We will apply these rules and practice some more when we get to the actual
recording process.

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Introduction to Transaction Analysis: The Basic Accounting

Equation
Learning Objective:
to analyze a business transaction and make a transaction analysis using the
Basic Accounting Equation.
Accounting is built upon the fundamental accounting equation:
Assets = Liabilities + Owner’s Equity
This equation must remain in balance and for that reason our modern
accounting system is called a dual-entry system. This means that every
transaction that is recorded in accounting records must have at least two
entries; if it only has one entry the equation would necessarily be
unbalanced.
The equation’s three parts are explained as follows:
1. Assets = what the business has or owns (equipment, supplies, cash,

accounts receivable)
2. Liabilities = what the business owes outsiders (bank loan, accounts
payable)
3. Owner’s Equity = what the owner owns (investment and business
profit)
The Accounting Equation
From the equation we can see that what the business owns (assets) equals
what it owes both creditors (liabilities) and the owners (equity).
1. The business owes creditors for loans made and other obligations to
pay for goods or services.

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2. The business owes the owner for any money or other assets that the
owner invests in the business
3. The business also owes the owner the profit that is realized from
business operations.
The accounting equation can be expressed in 3 ways:
Assets = Liabilities + Owners’ Equity

Liabilities = Assets – Owners’ Equity
Owners’ Equity = Assets – Liabilities
If you know any two of the amounts you can calculate the third.
Business Transactions occur on a daily basis as a result of doing

business. Items are purchased or sold, credit is extended or borrowed,
income is made or expenses are assumed. These business transactions
result in changes to the three elements of the basic accounting equation.
1. A transaction that increases total assets must also increase total

liabilities or owner’s equity.
2. A transaction that decreases total assets must also decrease total
liabilities or owner’s equity.
3. Some transactions may increase one account and decrease another on the same side of
the equation i.e. one asset increases and another decreases.

+ +
+ +
- -
- -
+ and -
Regardless of the nature of the specific transaction, the accounting

equation must stay in balance at all times.
Transaction Analysis is the process of reconciling the differences made to

each side of the equation with each financial transaction occurs. Let’s look
at some sample transactions to get a better understanding of how the
analysis and equation work.

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The accounting equation for a brand new company will look like this:
Php 0 Php0 Php0
Transaction 1: The owner deposits Php5000 in the checking account to

begin operations
+ Php5000 Php 0 + Php 5000
The asset “Cash” is increased by $5000 and the Owner’s Equity is increased
Php 5000. The business owes the owner Php 5000.
Transaction 2: The business purchases a computer, on credit, for Php 2500.
+ Php 2500 + Php 2500 Php
The asset “Computers” is increased by Php2500 and the liability is also

increased Php2500 because the business now owns the store Php2500.
Transaction 3: The business purchases office supplies using Php550 cash.
+ Php550
- Php550
The asset “Office Supplies” is increased Php550 and the asset “Cash” is
decreased Php550.
Transaction 4: A business purchases a building for Php100, 000 with a

Php25,000 cash down-payment and a loan for the Php75,000 outstanding.

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+ Php100,000 +75,000
- Php 25,000
More than two accounts are affected by this transaction. The asset

“Building” increases by Php100, 000, the asset “Cash” decreases by
Php25,000, and the liability “Bank Loan” increases by Php75,000. The net
result is that both sides of the equation increase by Php75K.
As you can see, regardless of the transaction, the accounting equation must
stay balanced.
The Expanded Accounting Equation breaks out the Owner’s Equity section
into two components: Revenues and Expenses.
Revenues = what the business earns for providing goods or services

Expenses = the cost of assets the business uses to generate revenues
(payroll, depreciation, rent, utilities, taxes)
The business’ Profit or Loss equals the Revenues – Expenses. If Revenues

are more than Expenses, there is Profit. If Expenses are more than
Revenues, there is Loss. The owner of the company also has the option to
withdraw equity from the company in the form of drawings (proprietorships
and partnerships) or dividends (corporations).
When you look at these relationships to Owner’s Equity in terms of the

accounting equation you see that
1. Revenues increase Owner’s Equity

2. Expenses decrease Owner’s Equity
3. Drawings or Dividends decrease Owner’s Equity:
The expanded Accounting Equation looks like this:
Assets = Liabilities + Owner’s Equity + Revenues – Expenses – Drawings
Let’s analyze some transactions involving these types of accounts:
Transaction 5: The business sells goods for Php1,200 cash.

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+ Php1200 + Php1200 (Revenue)
The asset “Cash” is increased Php1200 and the revenue increases Owner’s
Equity Php1200.
Transaction 6: The business pays its rent monthly rent of Php950 using a
company check.
- Php950 - Php950 (Expense)
The asset “Cash” is decreased Php950 and the expense decreases Owner’s
Equity Php950.
Transaction 7: The business’ owner withdraws Php2, 000 for his personal
use.
- Php 1200 - Php1200 (Revenue)
The asset “Cash” is decreased Php2000 and the drawing decreases Owner’s
Equity Php2000.
The accounting cycle is the sequence of procedures used to keep

track of what has happened in the business and to report the financial effect
of those things. The financial reports will only make sense if the accounts
have been analyzed correctly and the accounting equation remains
balanced. This is the fundamental building block of accounting and you
must learn and apply transaction analysis before continuing further.

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Self – Check 1.2-3
Instruction: Prepare a transaction analysis on the following business

transactions of EFG Enterprise for the month of July, 2013.
1 Mr. Chan invested 240,000 in the business.

2 Paid rent for September, P 6,500.
3 Received cash from customers on account, P23, 000.
4 Purchased 1 unit of computer in cash, P 32,000.
8 Billed customers for services rendered, P28, 000.
9 Made a payment on accounts payable, P11, 000.
12 Bought supplies and agreed to pay in thirty days, P P3, 800.
15 Paid salaries for the first half of September, P19,000.
16 Received cash from customer for services rendered, P48, 000.
20 Paid the electric and telephone bills for the month, P1, 600.
21 Paid the water bill for September, P1, 200.

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Answer Key 1.2-3
Date ASSET LIABILITY OWNER’S EQUITY

1 +25, 000 + 25, 000
2 - 6, 500 - 6, 500
+ 23, 000
3
- 23, 000
+ 32, 000
4
- 32, 000
8 + 28, 000 + 28, 000
9 - 11, 000 - 11, 000
12 + 3, 800 +3, 800
15 - 19, 000 - 19, 000
16 + 48, 000 + 48, 000
20 - 1, 600 - 1, 600
21 - 1, 200 - 1, 200

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Learning Outcome 3 Prepare Journal Entry
CONTENTS:
Journalizing of Proprietor account titles
Journalizing of Partnerships account titles
Journalizing of Corporation Account titles
ASSESMENT CRITERIA:
1. Journals are prepared in accordance with industry practice and
generally accepted accounting principles/Philippine Financial Reporting
Standards for transactions and events.
2. Debit account titles are determined in accordance with chart of
accounts
3. Credit account titles are determined in accordance with chart of
accounts
4. Explanation to journal entry is prepared in accordance with the nature
of transaction
5. Journal entries are prepared with 100% accuracy
CONDITION:
Labels
ASSESMENT METHOD:
3. Questioning

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Learning Outcome 3: Prepare journal entry
Information Sheet 1.3-1 Read and understand the information

sheet and all related books on the nature
Read Information Sheet 1.3-1 of business. You may also download and
Journalizing of Proprietor Account Titles read from the internet related topics.
Preparing General Journals for Sole- skills.
Proprietorship The Performance Criteria Checklist will
Information Sheet 1.3-2 Read and understand the information

sheet and all related books on the nature
Read Information Sheet 1.3-2 of business. You may also download and
Special Journals read from the internet related topics.
Preparing Special Journals skills.
The Performance Criteria Checklist will

Preparing Ledger.

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Journalizing of Proprietor Account Titles
Learning Objective:
to prepare Journal Entries according to the generally accepted accounting
principles.
After analyzing and preparing the business documents, the

transactions are then recorded in the journal. In double-entry accounting,
transactions are recorded in the journal through journal entries.
The journal, also known as Books of Original Entry, keeps records of

transactions in chronological order. In other words, transactions are
recorded in the journal as they occur, one after the other.
A simple journal looks like this:
Date
Particulars Debit Credit
yyyy
mmm dd Account debited amount
Account credited amount

dd Account debited amount
Account credited amount
A column for posting reference or folio may also be included to

facilitate easier tracking and cross-referencing within the accounting
system. Also, an explanation of the transaction being recorded may be included below
the row for account credited. The journal would then look like this:
Date
Particulars PR Debit Credit
yyyy
mmmddAccount debited ref. # amount
Account credited ref. # amount
Explanation or annotation.

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A Simple Illustration
Let's try to prepare a journal entry for this transaction: On June 3,

2013, our company purchased computer equipment for its main office and
paid 1,200.00 in cash.
When we analyze that transaction, it would show that the accounting effects
would be an increase in an asset account (Computer Equipment), and a
decrease in another asset (Cash) since we paid for the equipment.
The journal entry would be:
Date
2013
Jun 3 Computer Equipment 1,200.00
Cash 1,200.00
To record purchase of computer equipment.
You will have no trouble as long as you know how to use debits and
credits and what accounts to record. In the above example, computer
equipment is an asset account.
To increase an asset account, you debit it. Hence, we are debiting

Computer Equipment. Cash is also an asset account. However, there is a
decrease in cash because we paid for the computer equipment. Therefore,
we credit Cash.
Easy, right? No? Don't worry; it does require a little practice and some
exposure.
Compound Journal Entries
When there is only one account debited and one credited, it is called a
simple journal entry. There are however instances when more than one
account is debited or credited. They are called compound journal entries.
Let's take the previous transaction and change it up a bit. Here's the
new transaction: On June 3, 2013, our company purchased computer
equipment at 1,200.00. Our company paid 800.00 and the 400.00 balance
will be paid after 30 days.
The journal entry would be:

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Date
2013
Jun 3 Computer Equipment 1,200.00
Cash 800.00
Accounts Payable 400.00
To record purchase of computer equipment.
The journal entry shows that the company received computer equipment
worth 1,200. Cash is decreased by 800, the amount paid.
In addition, the company incurred in an obligation to pay 400 after 30

days. The liabilities of the company increased. When we increase liabilities,
we credit it. That is why we credited Accounts Payable (a liability account) in
the above entry.
Notice that the total amount debited is equal to the total amount
credited.
`For additional practice and exposure in journalizing transactions, here are

some more examples of business transactions and their journal entries.
The transactions pertain to Gray Specialized Repairs and Installation, our

imaginary small sole proprietorship business. All transactions are assumed
and simplified for illustration purposes.
Transaction #1: On March 1, 2013, Mr. Donald Gray started an installation

and repair business for specific types of equipment by investing 10,000.
The journal entry should increase the company's Cash, and establish/increase the capital
account of Mr. Gray; hence:
Date
2013
Mar 1 Cash 10,000.00
Mr. Gray, Capital 10,000.00
To record the investment of Mr.
Donald Gray
Transaction #2: On March 5, Gray Specialized Repairs and Installation paid

registration and licensing fees for the business, 370.
First, we will debit the expense (to increase an expense, you debit it); and then, credit Cash to
record the decrease in cash as a result of the payment.

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5 Taxes and Licenses 370.00
Cash 370.00
To record the payment of registration
and licensing fees
Transaction #3: On March 6, the company acquired tables, chairs, shelves,

and other fixtures for a total of 3,000. The entire amount was paid in cash.
There is an increase in an asset account (Furniture and Fixtures) in exchange for a decrease in
another asset (Cash).
6 Furniture and Fixtures 3,000.00

Cash 3,000.00
To record the purchase of tables,
chairs, shelves and other fixtures
Transaction #4: On March 7, the company acquired service equipment at

16,000. The company paid a 50% down payment and the balance will be
paid after 60 days.
This will result in a compound journal entry. There is an increase in an

asset account (debit Service Equipment, 16,000), a decrease in another
asset (credit Cash, 8,000 – the amount paid), and an increase in a liability
account (credit Accounts Payable, 8,000 – the balance to be paid after 60 days).
7 Service Equipment 16,000.00

Cash 8,000.00
Accounts Payable 8,000.00
To record the purchase of service
equipment paying 50% down payment
Transaction #5: Also on March 7, Gray Specialized Repairs and Installation

purchased service supplies on account amounting to 1,500.
The company received supplies thus we will record a debit to increase supplies. By the terms
"on account", it means that the amount has not yet been paid; and so, it is recorded as a
liability of the company.
7 Service Supplies 1,500.00

Accounts Payable 1,500.00
To record the purchase of service
supplies on account

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Transaction #6: On March 9, 2013, the company received 1,900 for services
rendered. We will then record an increase in cash (debit the cash account) and an increase in
income (credit the income account).
9 Cash 1,900.00
Service Revenue 1,900.00
To record the receipt of cash of for
services rendered
Transaction #7: On March 12, the company rendered services on account,

1,650.00. As per agreement with the customer, the amount is to be collected
after 5 days. Under the accrual basis of accounting, income is recorded when
earned.
In this transaction, the services have been fully rendered (meaning, we made an income; we
just haven't collected it yet.) Hence, we record an increase in income and an increase in a
receivable account.
12 Accounts Receivable 1,650.00

To record the collectible account from
services rendered.
Transaction #8: On March 14, Mr. Gray invested an additional 3,200.00 into the
business. The entry would be similar to what we did in transaction #1, i.e. increase cash and
increase the capital account of the owner.
14 Cash 3,200.00
Mr. Gray, Capital 3,200.00
To record the additional investment of
Mr. Gray
Transaction #9: Rendered services to a big corporation on March 15. As per

agreement, the 3,400 amount due will be collected after 30 days.
15 Accounts Receivable 3,400.00

To record the collectible account for
services performed.
Transaction #10: On March 17, the company collected from the customer in transaction
#8. We will record an increase in cash by debiting it. Then, we will credit accounts receivable
to decrease it. We are actually reducing the receivable since it has already been collected.

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17 Cash 1,650.00
Accounts Receivable 1,650.00
To record the collection of account in
#8.
Transaction #11: On March 20, the company paid some of its liability in
transaction #6 by issuing a check. The company paid 500 of the 1,500
balance.
To record this transaction, we will debit Accounts Payable for $500 to decrease it by that
amount. Then, we will credit cash to decrease it as a result of the payment. The entry would
be:
20 Accounts Payable 500.00

Cash 500.00
TO record the partial payment of
account in #6.
The balance of the accounts payable in transaction number #6 would now be

1,000 credit (1,500 initial credit and now a 500 debit).
Transaction #12: On March 25, the owner withdrew cash due to an

emergency need. Mr. Gray withdrew 7,000 from the company.
Naturally, there is a decrease in Cash since the company paid Mr. Gray
7,000. And, we will increase/record withdrawals (Mr. Gray, Drawing) for the said amount.
25 Mr. Gray, Drawings 7,000.00

Cash 7,000.00
To record withdrawal of cash by Mr.
Gray
Transaction # 13: On March 29, the company paid rent for March, 1,500.
Again, we will record the expense by debiting it and decrease cash by crediting it.
29 Rent Expense 1,500.00

Cash 1,500.00
To record the payment of rent for
March.
Transaction #14: On March 30, the company acquired a 12,000 short-term

bank loan; the entire amount plus a 10% interest is payable after 1 year.

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Again, the company received cash so we increase it by debiting Cash. The company now has
a liability (Loans Payable). We increase it by crediting the liability account.
5 Cash 12,000.00
Loans Payable 12,000.00
To record bank loan.
Transaction #15: On March 31, the company paid salaries to its employees,
3,500.
For this transaction, we will record/increase the expense account by

debiting it and decrease cash by crediting it. (Note: This is a simplified entry
to present the payment of salaries. In actual practice, different payroll
accounting methods are applied.)
31 Salaries Expense 3,500.00

Cash 3,500.00
To record the payment of salaries to
employees

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TASK SHEET 1.3-1
Title: Prepare General Journal for Sole-Proprietorship

a completed Journal Entries in accordance with
the generally accepted accounting principles.
Supplies/Materials : Journal Book / Ball Pen / Calculator
Equipment :
Steps/Procedure:
1. Write the Headings in the Journal Sheet: DATE, PARTICULARS,
P.R., DEBIT, CREDIT.
2. Write the page number.
3. Answer the following problem by providing the correct journal
entry for each transaction.
Assessment Method:

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The Tuxedo Communications is a public relations firm. During the Month of
September, the company completed the following transactions:
September
1 Mr. Chan invested 240,000 in the business.
3 Paid rent for September, P 6,500.
5 Received cash from customers on account, P23, 000.
6 Purchased 1 unit of computer in cash, P 32,000.
10 Billed customers for services rendered, P28, 000.
11 Made a payment on accounts payable, P11, 000.
13 Bought supplies and agreed to pay in thirty days, P3, 800.
17 Paid salaries for the first half of September, P19, 000.
18 Received cash from customer for services rendered, P48, 000.
22 Paid the electric and telephone bills for the month, P1, 600.
23 Paid the water bill for September, P1, 200.
25 Received a bill, to be paid on October, for advertisement placed
in a national newspaper during the month of September to
promote the business, P7, 000.
28 Billed a customer for services rendered, P27, 000.
29 Paid salaries for the second half of September, P 19, 000.
30 Withdrew cash for personal use, P12, 000.
Required:
1. Prepare the journal entries using the following accounts:

Cash; Accounts Receivable; Supplies; Office Equipment;
Accounts Payable; J. Chan, Capital; J. Chan, Drawing;
Public Relations Revenue; Salaries Expense; Rent
Expense; Utilities Expense; and Advertising Expense.

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Name: __________________________
CRITERIA
Did you…. YES NO
1. Prepare the headings for each of the columns in the
journal book?
2. Indent the CREDIT accounts?
3. Balance the amount in both DEBIT and CREDIT?
4. Put the page number for each page consumed?
5. Check the correct use of grammar in the explanation?
6. Write the sign of Peso only on the first amounts in the
Debit and Credit?
7. Use the correct account titles and its corresponding
amount?
8. Write the month – SEPTEMBER only once?
9. Provide a space after each of the journal entries?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
________
Checked by:
MR. CARY P. JAUCIAN

Trainer
Answer Key 1.3-1

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Date
Particulars P.R. Debit Credit
2013
Sept
. 1 Cash P 240, 000
J. Chan, Capital P 240, 000
To record the investment of Mr.
Chan.

3 Rent Expense 6, 500
Cash 6, 500
To record the payment of rent.

5 Cash 23, 000
Accounts Receivable 23, 000
To record the receipt of cash
on account

6 Office Equipment 32, 000
Cash 32, 000
To record the purchase of computer

10 Accounts Receivable 28, 000
Public Relations Revenue 28, 000
TO record the bill to customers

11 Accounts Payable 11, 000
Cash 11, 000
To record the payment of account.

13 Supplies 3, 800
Accounts Payable 3, 800
To record the purchase of supplies
on account

17 Salaries Expense 19, 000
Cash 19, 000
To record payment of salaries

18 Cash 48, 000

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To record the receipt of cash for
services rendered

22 Utilities Expense 1, 600
Cash 1, 600
To record the payment of electric
and telephone bills

23 Utilities Expense 1, 200
Cash 1, 200
To record the payment of water bills

25 Advertising Expense 7, 000
Accounts Payable 7, 000
To record the payment of
advertisement
placed in a national newspaper

28 Accounts Receivable 27, 000
To record the bill to a customer

29 Salaries Expense 19, 000
Cash 19, 000
To record the payment of salaries

30 J. Chan, Drawing 12, 000
Cash 12, 000
To record the withdrawal of cash
by Mr. Chan

Accounting for Special Journals

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to prepare Special Journal Entries according to the generally accepted
accounting principles.
Entering transactions in the general journal and posting them to the

correct general ledger accounts is time consuming. In the general journal, a
simple transaction requires three lines—two to list the accounts and one to
describe the transaction. The transaction must then be posted to each
general ledger account. If the transaction affects a control account, the
posting must be done twice—once to the subsidiary ledger account and once
to the controlling general ledger account. To speed up this process,
companies use special journals to record repetitive transactions that affect
the same set of accounts and have a consistent description. Such
transactions can be documented on one line in a special journal. Then,
instead of separately posting individual entries, each column's total is
posted at the end of the accounting period.
Although companies create special journals for other types of

repetitive transactions, almost all merchandising companies use special
journals for sales, purchases, cash receipts, and cash disbursements.
Sales journal. The sales journal lists all credit sales made to customers.
Sales returns and cash sales are not recorded in this journal. Entries in the
sales journal typically include the date, invoice number, customer name,
and amount. Invoices are the source documents that provide this
information. In its most basic form, a sales journal has only one column for

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recording transaction amounts. Each entry increases (debits) accounts
receivable and increases (credits) sales.
Notice the dates and posting references applied to each entry in the
illustration to the right. Each day, individual sales journal entries are posted
to the accounts receivable subsidiary ledger accounts so that customer
balances remain current. Customer account numbers (or check marks if
customer accounts are simply kept in alphabetical order) are placed in the
sales journal's reference column to indicate that the entries have been
posted. At the end of the accounting period, the column total is posted to
the accounts receivable and sales accounts in the general ledger. Account
numbers are placed in parentheses below the column to indicate that the
total has been posted.
Many companies use a multi-column (columnar) sales journal that

provides separate columns for specific sales accounts and for sales tax
payable. Each line in a multi‐column journal must contain equal debits and
credits. For example, the entries in the sales journal to the right appear
below in a multi‐column sales journal that tracks hardware sales, plumbing
sales, wire sales, and sales tax payable. Individual entries are still posted
daily to the accounts receivable subsidiary ledger accounts, and each
column total is posted at the end of the accounting period to the appropriate
general ledger account.

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Purchases journal. The purchases journal lists all credit purchases of

merchandise. Entries in this journal usually include the date of the entry,
the name of the supplier, and the amount of the transaction. Some
companies include columns to identify the invoice date and credit terms,

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thereby making the purchases journal a tool that helps the companies take
advantage of discounts just before they expire. The purchases journal to the
right has only one column for recording transaction amounts. Each entry
increases (debits) purchases and increases (credits) accounts payable.
Each day, individual entries are posted to the accounts payable

subsidiary ledger accounts. Creditor account numbers (or check marks if
the creditor accounts are not numbered) are placed in the purchases
journal's reference column to indicate that the entries have been posted. At
the end of the accounting period, the column total is posted to purchases
and accounts payable in the general ledger. Account numbers are placed in
parentheses below the column to indicate that the total has been posted.
Companies that frequently make credit purchases of items other than

merchandise use a multi‐column purchases journal. For example, the
purchases journal below includes columns for supplies and equipment. Of
course, every purchase in the journal below must credit accounts payable;
equipment purchased with a note payable or supplies purchased with cash
would not be recorded in this journal. Individual entries are still posted daily
to the accounts payable subsidiary ledger accounts, and each column total
is posted at the end of the accounting period to the appropriate general
ledger account.

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Cash receipts journal. Transactions that increase cash are recorded in a
multi-column cash receipts journal. If sales discounts are offered to
customers, the journal includes a separate debit column for sales discounts.
Credit columns for accounts receivable and for sales are normally present,
but companies that frequently receive cash from other, specific sources use
additional columns to record those types of cash receipts. In addition, the
cash receipts journal includes a column named Other, which is used to
record various types of cash receipts that occur infrequently and therefore
do not warrant a separate column. For example, cash receipts from capital
investments, bank loans, and interest revenues are generally recorded in the
Other column. However, a company that provides consumer loans and
receives interest payments from many customers would probably include a
separate column for interest revenue. Whenever a credit entry affects
accounts receivable or appears in the Other column, the specific account is
identified in the column named Account.

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Accounts receivable payments are posted daily to the individual
subsidiary ledger accounts, and customer account numbers (or check
marks if the customer accounts are not numbered) are placed in the cash
receipts journal's reference column. At the end of the accounting period,
each column total is posted to the general ledger account listed at the top of
the column, and the account number is placed in parentheses below the
total. Entries in the Other column are posted individually to the general
ledger accounts affected, and the account numbers are placed in the cash
receipts journal's reference column. A capital X is placed below the Other
column to indicate that the column total cannot be posted to a general
ledger account.

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Cash disbursements journal. Transactions that decrease cash are recorded
in the cash disbursements journal. The cash disbursements journal to the
right has one debit column for accounts payable and another debit column
for all other types of cash payment transactions. It has credit columns for
purchases discounts and for cash. Since each entry debits a control account
(accounts payable) or an account listed in the column named Other, the
specific account being debited must be identified on every line.
The nature of each company's transactions determines which columns

this journal includes. For example, companies sometimes choose to include
separate debit columns for regularly used accounts such as salaries
expense, sales commissions expense, or other specific accounts affected by
cash disbursements.
Entries that affect accounts payable are posted daily to the individual
subsidiary ledger accounts, and creditor account numbers (or check marks
if the creditor accounts are not numbered) are placed in the cash
disbursements journal's reference column. At the end of the accounting
period, each column total is posted to the general ledger account listed at
the top of the column, and the account number is placed in parentheses
below the total. Entries in the Other column are posted individually to the
general ledger accounts affected, and the account numbers are placed in the
cash disbursements journal's reference column. A capital Xis placed below
the Other column to indicate that the column total cannot be posted to a
general ledger account.

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General journal entries. The general journal is used for adjusting entries,
closing entries, correcting entries, and all transactions that do not belong in
one of the special journals. If a general journal entry involves an account in
a subsidiary ledger, the transaction must be posted to both the general
ledger control account and the subsidiary ledger account. Both account
numbers are placed in the general journal's reference column to indicate
that the entry has been posted correctly.

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TASK SHEET 1.3-2
Title: Prepare Special Journal

a completed Special Journal Entries in
accordance with the generally accepted
accounting principles.
Supplies/Materials : Journal Book / Ball Pen / Calculator
Equipment :
Steps/Procedure:
1. Write the Headings in the Special Journal Sheet.
2. Write the page number.
3. Answer the following problem by providing the correct journal
entry for each transaction.
Assessment Method:
The following transactions were completed by Mezza Co. during October of

the current year. Record the transactions in the revenue journal, cash
receipts journal, or general journal.
1 Billed Blanders Co. for services rendered on account, Invoice

No. 2883, P8, 250.
4 Billed Montana Co. for services rendered on account, Invoice
No. 2884, P5, 000.
8 Issued to Blanders Co. a credit for P1, 000 due to a
misunderstanding of services performed.
13 Received cash from Blanders Co. in payment of Invoice No.
2883.
14 Received cash from Montana Co. in payment of Invoice No.
2884.
25 Received cash for office supplies returned to the manufacturer,
P300.

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31. Services rendered for cash in October, P39, 600.
The following transactions related to purchases and cash payments were

completed by Kent Company during March of the current year. Record the
transactions in the purchases journal, cash payments journal, or the
general journal.
March
2 Purchased store supplies on account from Eastside Co., P1,
250.
8 Purchased store supplies on account from Bench Co., P600.
9 Received credit from Eastside Co., P300 for supplies returned.
16 Issued Check No. 230 to Bench Co. in payment of the balance
due.
20 Issued Check No. 231 for a cash purchase of office supplies,
P250.
27 Issued Check No. 232 to Eastside Co. in payment of the
balance due.
28 Purchased the following on account from James & Co.: store
supplies, P800; office supplies, P100.

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Name: __________________________
CRITERIA
Did you…. YES NO
1. Prepare the headings for each of the columns in
the special journal?
2. Classify each transaction according to the use of
special journals?
3. Balance the amount in both DEBIT and CREDIT?
4. Put the page number for each page consumed?
5. Check the correct use of grammar in the
explanation?
6. Write the sign of Peso only on the first amounts in
the Debit and Credit?
7. Use the correct account titles and its
corresponding amount?
8. Compute the exact balance for each special
journal?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
________
Checked by:
MR. CARY P. JAUCIAN

Trainer

August 7, 2013 78 | P a g e
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HOW TO USE THIS COMPETENCY BASED LEARNING

Welcome to the Module: Journalizing Transactions. This module

You are required to go through a series of learning activities in order

Recognition of Prior Learning (RPL)

 been working for someone

If you can demonstrate to your trainer that you are competent in a

CBLM on Document No. 2013 - 001

 Most probably your trainer will also be your supervisor or manager.

 You will be given plenty of opportunities to ask questions and practice on

CBLM on Document No. 2013 - 001

No. Unit of Competency Module Title Code

Lead workplace communication Leading workplace 500311109

Lead small team 500311110

Develop and practice Developing and practice 500311111

Solve problems related to work Solving problems related to 500311112

Use mathematical concepts Using mathematical 500311113

Use relevant technologies Using relevant 500311114

Apply quality standards HCS315202

Perform computer operations Performing computer HCS311201

Maintain an effective Maintaining an effective

Manage own performance Managing own HCS913202

CBLM on Document No. 2013 - 001

Post transactions HCS412302

Prepare trial balance HCS412303

Prepare financial reports Preparing Financial HCS412304

Review internal control system Reviewing Internal Control HCS412305

CBLM on Document No. 2013 - 001

Qualification: Bookkeeping NC III

Unit of Competency: Journalize Transactions

Module Title: Journalizing Transactions

Nominal Duration: 120 Hours

This module is designed to cover the knowledge, skills, and attitudes

CBLM on Document No. 2013 - 001

CBLM on Document No. 2013 - 001

Learning Outcome 1 Prepare chart of accounts

1. Nature of business is determined based on client information

CBLM on Document No. 2013 - 001

Learning Outcome 1: Prepare chart of accounts

Learning Activities Special Instructions

Information Sheet 1.1-1

Read Information Sheet 1.1-1 Read and understand the information

Do: Self Check Answer the Questions carefully and cross

Information Sheet 1.1-2

Read Information Sheet 1.1-2 Read and understand the information

Do: Self Check Answer the Questions carefully and cross

CBLM on Document No. 2013 - 001

CBLM on Document No. 2013 - 001

FORMS OF BUSINESS ORGANIZATIONS

ACTIVITIES PERFORMED BY BUSINESS ORGANIZATIONS

CBLM on Document No. 2013 - 001

 Entity Concept. It is the most basic concept in accounting. An

CBLM on Document No. 2013 - 001

SPECIALIZED ACCOUNTING SERVICES

USERS AND THEIR INFORMATION NEEDS

 Investors. They need information to help them determine whether

CBLM on Document No. 2013 - 001

CBLM on Document No. 2013 - 001

CBLM on Document No. 2013 - 001

CBLM on Document No. 2013 - 001