Week 1 - Accounting Equation

LEARNING CONTENT

Good Morning and Welcome to our class.

Our course for this semester is Financial Accounting and Reporting, the foundation of all accounting related
courses.

Before we start. Let us first concentrate on basic accounting equation.

What is the Accounting Equation?

An accounting transaction is a business activity or event that causes a measurable change in the accounting
equation.

The accounting equation is a basic principle of accounting and a fundamental element of the balance sheet.
The equation is as follows:

Assets = Liabilities + Equity

This equation sets the foundation of double-entry accounting and highlights the structure of the balance sheet.
Double-entry accounting is a system where every transaction affects both sides of the accounting equation.

For every change to an asset account, there must be an equal change to a related liability or equity account. It
is important to keep the accounting equation in mind when performing journal entries.

NOTE: If an entity keeps accurate records, the accounting equation will always be "in balance," meaning the
left side should always equal the right side. The balance is maintained because every business transaction
affects at least two of an entity's accounts. For example, when an entity borrows money from a bank, the
entity's assets will increase and its liabilities will increase by the same amount. When an entity purchases
inventory for cash, one asset will increase and one asset will decrease. Because there are two or more
accounts affected by every transaction, the accounting system is referred to as double-entry accounting.

The balance sheet is broken down into three major sections and their various underlying items: Assets,
Liabilities and Equity.

ASSETS- are future economic benefits controlled by an organization/entity as a result of past transactions or
other past events.
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-reflect the total value of the property that the business has, and which is in its turnover. In other words, it is
what it owns.

LIABILITIES- Liabilities are future sacrifices of economic benefits that an organization is presently obliged
to make to other organizations or individuals as a result of past transactions or events.

-reflect the size of the financing of an organization’s assets by third parties, banks, and private financial
institutions. This is what the company owes.

EQUITY- represents the residual (what is left) once all fixed claims have been satisfied or simply “assets
less/minus liabilities”.

-equity characterizes the value of investments made in this organization by its owner/s

Example 1:

Juan dela Cruz started his Coffee Shop business by investing his Cash savings amounting to P 500,000.00
and borrowed P250,000.00 from ABC Bank. Assets= Cash P 500,000.00 (owned)

Liabilities= Loan P 250,000.00 (owed) Assets = Liabilities + Equity

P 500,000.00 = P 250,000.00 + P 250,000.00
Equity= Assets – Liabilities (P 250,000.00)
Assets - Liabilities= Equity
P 500,000.00 – P 250,000.00 = P 250,000.00

Assets – Equity = Liabilities

P 500,000.00 – P 250,000.00 = P 250,000.00

THE EXPANDED ACCOUNTING EQUATION

The expanded accounting equation provides more details for the owner's equity amount shown in the basic
accounting equation. The expanded accounting equation for a sole proprietorship is: Assets = Liabilities +
Equity (Owner's Capital) + Revenues – Expenses – Owner's Draws.

The expanded accounting equation allows you to see separately (1) the impact on equity from net income
(increased by revenues, decreased by expenses), and (2) the effect of transactions with owners (draws,
dividends, sale or purchase of ownership interest).

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EQUITY- is the residual interest in the assets of the entity after deducting all the liabilities (IASB Framework).

- is what the owners of an entity have invested in an enterprise. It represents what the business
owes to its owners. It is also a reflection of the capital left in the business after assets of the
entity are used to pay off any outstanding liabilities.

REVENUE- is the income generated from normal business operations and includes discounts and deductions
for returned merchandise. It is the top line or gross income figure from which costs are subtracted to determine
net income.

- If the revenues earned are a main activity of the business, they are considered to be operating
revenues. If the revenues come from a secondary activity, they are considered to be
nonoperating revenues.
- Normally increases ASSETS.

EXPENSE- An expense is the cost of operations that a company incurs to generate revenue. As the popular
saying goes, “it costs money to make money.”

- There are two main categories of business expenses in accounting: operating expenses and
nonoperating expenses.
- Normally decreases ASSETS.

***The difference between revenue and expenses represents profit or loss.

- If revenue is greater than expenses, the difference is profit

- If revenue is less than expenses, the difference is loss

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Example 2:

Juan dela Cruz, on the first month of operating his Coffee Shop, earned a Revenue (received cash) of P
50,000.00 and incurred total expenses (paid cash) of in the amount of P 30,000.00 (Wages of
crew/staff/cashier, Supplies, Rent, Utility Expenses).

Assets= P 500,000.00

Liabilities= P 250,000.00

Equity= P 250,000.00
Revenue= P 50,000.00

Expenses= P 30,000.00
ASSETS = LIABILITIES + EQUITY + REVENUE - EXPENSES

Example 1- Juan dela Cruz P 500,000.00 P 250,000.00 P 250,000.00 -0- -0-

started his Coffee Shop business
by investing his Cash savings
amounting to P 500,000.00 and
borrowed P250,000.00 from ABC
Bank.

Example 2- Juan dela Cruz, on P 50,000.00 P 50,000.00

the first month of operating his (P
Coffee Shop, earned a 30,000.00) P 30,000.00
Revenue (received cash) of P
50,000.00 and incurred total
expenses (paid cash) of in the
amount of P 30,000.00 (Wages
of crew/ staff/ cashier, Supplies,
Rent, Utility Expenses).

P 520,000.00 P 250,000.00 P 250,000.00 P 50,000.00 P 30,000.00

P 520,000.00 P 250,000.00 P 270,000.00

Week 2 - Major Accounts / Books of Accounts

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LEARNING CONTENT

Last week, you learned what the accounting equation is. We also had same drills on how the accounting
equation works.

We can now proceed on the discussion on the different accounts found in the accounting equation, the
different books of accounts and the double entry bookkeeping.

Let us start.

Account is defined as a basic summary device in accounting. The account is also defined as a record of
increases and decreases in assets, liabilities, equity, income or revenues and expenses. Incidentally, these
are also our five major accounts and also called the elements of financial statements.

The account resembles the letter ‘T’ as it also being depicted as a T-account.

An account has three (3) parts:

1. Account Title
2. Debit
3. Credit

Stated differently, a T-account is an informal term for a set of financial records that uses double-entry
bookkeeping. ... The title of the account is then entered just above the top horizontal line, while underneath
debits are listed on the left and credits are recorded on the right, separated by the vertical line of the letter T.

For better appreciation, here is a sample of entries using the T-account

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Classification of the Five (5) Major Accounts

The five (5) major accounts are further classified based on the financial statement where they appear:

Statement of Financial Position Accounts Statement of Income Accounts

1. ASSETS 1. INCOME
2. LIABILITIES 2. EXPENSES
3. EQUITY

The Statement of Financial Position is one of the components of a complete set of financial statements. It
shows the financial position of the business as of a given period of time.

The Income Statement is a sub-component of the Statement of Comprehensive Income, is also one of the
major components of a complete set of financial statements. It is also known as statement of Profit or Loss,
shows financial performance for a given period of time.

The Financial Statement is thoroughly discussed in Intermediate Accounting 3.

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Chart of Accounts
A chart of accounts is a list of all accounts used by the business.

Sample chart of accounts is presented below:

Notes on the Chart of Accounts:

1. It follows a certain order of presentation, such that the Assets are presented first followed by the
other Statement of financial Position accounts and then the income statement accounts;
2. All the asset accounts are preceded by the number 1, liabilities by the number 2 and so on.
3. The chart of accounts may be accompanied with a handbook containing the account titles, their
definition and uses, a sample is presented below;
4. You can design your own chart of accounts; and formulate the account titles to be used.

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COMMON ACCOUNT TITLES USED

Statement of Financial Position - ASSETS

CASH Includes money or equivalent that is unrestricted . example is cahd on
hand and cash in bank
ACCOUNTS RECEIVALBE Oral or written promises to pay sums of money
ALLOWANCE FOR BAD Estimated losses on uncollectible accounts receivable
DEBTS
NOTES RECEIVABLE Promises to pay supported by a promissory note
INVENTORY Goods held by the business intended for sale
PREPAID SUPPLIES Unused office and other supplies
PREPAID RENT Rent paid in advance
PREPAID INSURANCE Insurance paid in advance
BUILDING Structures owned by the business used in operations
ACCUMULATED Total amount of depreciation expenses recognized since the fixed asset
DEPRECIATION was made available for use
EQUIPMENT Consists of machineries, transportation equipment, office equipment like
table, chairs, cabinets, computer equipment like server, laptops, desktop
and furniture and fixtures

Statement of Financial Position - LIABILITIES

ACCOUNTS PAYABLE Obligations to pay sums of money oral or informal.
NOTES PAYABLE Obligations to pay sums of money supported by a promissory note
INTEREST PAYABLE Interest already due but not yet paid. Most common example is interest
on bank loan
SALARIES PAYABLE Already earned by employees but not yet paid as of balance sheet date
UTILITIES PAYABLE Electric, water, telephone, cable, internet already used but not yet paid
UNEARNED INCOME Income already collected but the related services will be done in the
future

Statement of Financial Position - EQUITY

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 OWNER’S CAPITAL What is remaining after deducting liabilities from capital (A-L = OE)
OWNER’S DRAWING Record temporary withdrawals by the owner and it is closed to the
owner’s capital at the end of the accounting period

Income Statement Accounts - INCOME

SERVICE FEES Revenue earned after rendering services
SALES Revenue earned from selling goods
INTEREST INCOME Arises from interest bearing receivables
GAINS Income earned from the sale of assets other than Inventory.

Income Statement Accounts - EXPENSES

COST OF SALES or COST OF Value of inventories sold for a certain accounting period
GOODS SOLD
FREIGHT OUT or Seller’s expenses for delivering goods to customers
DELIVERY EXPENSE
SALARIES EXPENSE Amounts paid to employees for services rendered
RENT EXPENSE Cost of rentals used during the accounting period
UTILITIES EXPENSE Cost of power and electricity, used during the accounting period
DEPRECIATION EXPENSE A portion of the cost of a depreciable fixed asset for the accounting
period
BAD DEBTS EXPENSE or Estimated business losses arising from uncollected accounts
DOUBTFUL ACCOUNTS receivables
EXPENSE
TAXES AND LICENSES Cost of local and business taxes required by the government for
operating a business. Examples are mayor’s permit, cedula, DTI
permit, percentage taxes
TRANSPORTATION and Transportation expense is within the locality like tricycle and taxi fares
TRAVEL EXPENSES while Travel expenses are incurred by employees while going outside
of the place of business like plane fares, bus fares, hotel
accommodations and food allowances while on business trip
INTEREST EXPENSE Represents the cost of borrowing money. This is the amount paid to
the banks when availing of a loan.
ADVERTISING EXPENSE Cost of promotional activities intended to increase product awareness
of the public
LOSSES Come from sale of assets other than inventory that is lesser than book
value or decreases in the value of assets due to damages due to
natural calamities or other causes. An example of an ordinary loss is
the decrease in the market value of foreign currencies.
MISCELLANEOUS EXPENSE Small expenditures that are not required to be presented separately

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are your investment into your future.

We continue with the discussion.

The books of accounts is where we make a permanent record of our business transactions. It is a
requirement for tax audit purposes to keep a permanent file of these books.

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There are two types of books:

1. The Journal-is also known as the book of original entry. It is a record of the day-to-day transaction
called journal entries that follows a chronological order (by date). The act of recording in the journal is
called “Journalizing”.

There are also different kinds of journals, depending on needs of business.

1. Special Journal which is used to record transactions of similar items come in many forms:
• Sales Journal – is used to record sales on credit terms
• Purchases Journal – is used to record purchases on account
• Cash Receipts Journal – is used to record all transactions involving receipts of cash
• Cash Disbursements Journal – is used to record all transactions involving the payments
of cash

2. The General Journal is the simplest form of the journal. It is a record of all transactions that can not be
recorded in all of the other transaction journals. In the absence of special journals, the General Journal is
used to record all journal entries.

2. The Ledger – also known as the book of final entry is used to record all transactions after the journalizing
process is done. The process of transferring amounts from the journal to the ledger is called “Posting”

The General Ledger (G/L) comes in two (2) different forms.

a) General Ledger is a record of all accounts appearing in the trial balance, a sample manual
ledger is shown below:

b) Subsidiary Ledger provides a breakdown of the balances of some controlling accounts.

Some of the most common subsidiary ledgers are the Accounts Receivable, Accounts Payable, Fixed Assets
and other S/Ls that maybe set up by the business according to its needs.
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As you can see from the sample, the amount appearing on the General Ledger is transferred to the Subsidiary
ledger that with breakdown. The account and amount in the G/L is the controlling account. In the S/L entries
we come to know that the amount of P4,000 has 2 accounts of P2,000 each.

The Double-Entry System – Let me explain the double entry system by way of a diagram. A journal entry
always has two sides, the DEBIT and the CREDIT side. At all times, we maintain the equality of the debit and
credit. In layman’s terms, for every value that we give, we receive the same value in return. The key is give
and receive.

Stated in another way, a debit entry always has a corresponding credit entry.

Understanding Normal Balances of Accounts:

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TIP: Hone your mastery of the rules of debit and credit. This is where your strong basic foundation
should start.

Ending Balance of an Account

Depending on the type of account, whether asset, liability or equity account, the balance is always written on
its normal balance side. It is computed as a difference between total credits and total credits.

The diagram below analyzes normal balances of accounts based on its position in the accounting equation. If
you have observed, ASSETS are on the left side of the accounting equation, so increases in assets are
recorded on the debit side and decreases on the debit side.

Contra and Adjunct Accounts:

Contra accounts are deductions from the related account. Example: Allowance for Doubtful Accounts is a
contra account to Accounts Receivable.

Adjunct Accounts – are additions to the related account. Example: Premium on Bonds Payable is an
adjunct of Bonds Payable because it is added to the carrying amount of the Bonds.

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Lesson 3: Business Transaction and their Analysis
LEARNING CONTENT

At this point of time, we are done discussing the accounting equation, the major accounts, books of accounts, normal
balance of accounts and some specific accounts. I do hope you have understood them by heart.

Let us now apply the learnings we had for the past two weeks. Our focus is on the bookkeeping functions primarily
transaction analysis and recording, account classification and summarizing.

Are you ready to challenge your brains?

The life of Man goes through a cycle; from birth to death, there are stages in between. From infancy, the toddler years,
childhood, adolescence, adulthood, middle age and senior years. So this is the human life cycle.

In accounting, we also follow an accounting cycle, referring to a series of sequential steps and procedures performed to
accomplish the accounting process:

To put it simply:

The accounting cycle is a multi-step process designed to convert all of your company’s raw financial information
into financial statements.

In diagram form, may I present the accounting cycle:

Some authors include number 9 and 10 as part of the accounting cycle and they are:

9. Preparing the Post-closing Trial Balance

10.Recording the Reversing Entries

Note: Numbers 9-10 are optional, they are for internal control purposes only. Meaningful Financial Statements (F/S) can
still be prepared without these steps.

In short, the concept of an accounting cycle makes sure that all of the money passing through your business is
actually “accounted” for.

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Lesson 3 will only include steps 1 and 2; the rest of the accounting cycle will be discussed in the coming weeks.
Let us study the accounting cycle step by step.

1. Identifying and analyzing business transactions and documents

For me, this is the most crucial part of the process, why? Identifying will segregate accountable from non-accountable
transactions and events.

1. Accountable Event – that will be recorded in the business books as journal entries.
- will have an effect on the accounting equation: A = L + OE
- effect means an increase or decrease in the elements of the account equation

2. Non-accountable Event – not recorded in the books of accounts

- does not affect our assets, liabilities and owner’s equity
- just passing by
Example:

1. The daughter of the company President is getting married.

2. The daughter of the company President is getting married and he employees contributed P500 each to
come up with a nice wedding gift.
3. The daughter of the company President is getting married; the VP Finance approved P20,000 chargeable
against Expense: Representation and Entertainment account to purchase a wedding gift.

Just a mental exercise. Now, tell me, which one is an accountable event and which one is not. Justify your
answer/s.

SOURCE DOCUMENTS is an integral part of your accounting records and files.

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In short, source documents is the starting point of the accounting process.

REMEMBER:

The source document is essential to the bookkeeping and accounting process as it provides evidence that a
financial transaction has occurred. During an accounting or tax audit, source documents back up the accounting
journals and general ledger as an indisputable transaction trail.

Below are the common types of source documents:

1. Sales Invoice is issued by a seller evidencing the sale of goods and cash has been received in payment. It
shows the date, amount of transaction, description and quantity of the items sold, name and signature of the buyer and
some other particulars that are deemed appropriate and needed. Some sellers may also include the phrase “received
in good order” beside the signature of the buyer.

2. Official Receipt is issued for services rendered. It gives details as to date, amount, description of the services
rendered, signature of the party receiving cash and all other information deemed important.

It is noted that a Sales Invoice and an Official Receipt are both Principal evidence/proof of purchase. The difference lies on
what is being purchased — Sales Invoice is for the purchase of goods and Official Receipt is for the purchase of
services/lease of properties.

3. Purchase Order (PO) – is issued by the buyer to a supplier indicating among other information the types and
description, quantities and agreed prices of the goods being ordered

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When small businesses are just starting, they may forego a purchase order process in favor of a more informal approach
of ordering goods. But as they grow, and their purchases become more complex, a purchasing system needs to be
established that requires the issuance of a purchase order. . The purchase order (PO) is used as internal control measure.

4. Delivery Receipts – evidences the shipment and delivery and the receipt of goods. A common example is that
piece of paper that a courier will make you sign when delivering your orders from online.

5. Bank deposit slip – with machine validation, is an evidence that a deposit has been made with the bank stating
the amount and date, breakdown of the deposit, name and Signature of the teller receiving the deposit. I have to
emphasize “with machine validation” because without this, it should not be accepted as an evidence of deposit.
Sample of a duly Validated Deposit Slip is shown below:

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 6. Bank Statement – is a detailed report of deposit and withdrawal transactions with the bank for a certain period of
time issued by the bank indicating also the account’s accumulated balance. Some banks also include a total of debits
and total of credits and their average daily balance or ADB which is useful in determining the performance of a certain
account. The bank statement is being used for reconcilement purposes.

7. Statement of Account – or a notice of billing. Common example is your utilities bills. Another one is your school’s
assessment for unpaid tuition fees. Simply stated, this is a document evidencing the existence of unpaid account that
needs to be paid or settled.

8. Credit Memorandum (CM) – issued by the seller to acknowledge the return of goods by the buyer, The CM
reduces the amount that the buyer will pay the seller at the due date.

9. Promissory Note (PN) – is a written promise to pay by the maker to pay a sum of money to the payee at a certain
future date. It may also indicate the interest rate if it is an interest-bearing note. This is PN is received by the business
from its buyers and issued by the business to its suppliers.

There are other source documents in the books. The ones mentioned above are the common documents in a
merchandising business. The bottom line is a source document supports a journal entry.

Along with the other company records, the source docume

nts are required to be kept by the business for a certain period of time for audit purposes by the regulatory agencies. For
instance, the Anti -Money laundering Council (AMLC) requires that certain documents be kept for five (5) years in active
files and another five (5) years in archive.

Very important note:

Do not record a transaction unless it is supported by a valid supporting document.

Why valid documents?

Because some sellers issue provisional receipts, or any sheet of paper not prescribed and not approved by the BIR.
These are not valid receipts.

As a guide in the analysis of transactions, it may be useful to follow the four simple steps:
•Identify the transaction from the source documents. First, determine what kind of transaction it may be. ...
•Indicate the accounts, either assets, liabilities and/or owner’s equity, income or expense affected ...
•Identify the proper account titles to be used and determine whether increase or decrease, debit or credit. ...
•Using the rules of debit and credit, record the transaction.

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https://study.com/academy/lesson/using-the-accounting-equation-analyzing-business-transactions.html

2. Recording of Accounting Transaction (Journalizing) – is the recording phase of accounting in the book called the
journal. I hope you still remember the different types and forms of the Journal. The simplest form is the general
journal.

Important Note: The journal along with the other books of accounts of the business should be stamped by the
Bureau of Internal Revenue at every start of the year.

A sample journal follows:

Notes on the following:

1. Journal Entries are recorded chronologically (arranged by date)

2. Amounts and account titles to be debited and credited follow the double entry system
3. The credit entries are indented a little to the right
4. Every entry is accompanied by a short description of the transaction
5. In some instances, a folio column is added to write the reference number. The posting reference
facilitates referencing between the journal and the ledger. It is used in the posting process

Simple vs. Compound entry:

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As the name suggests, a compound entry has two or more debits or credits. A simple entry has only one debit and only
one credit entry.

Week 4 - Posting to GL and Preparation of Trial Balance

Lesson 4: Posting of Transactions and Preparation of Trial Balance

LEARNING CONTENT

Are you burnout? Mainly because of COVID and secondly, your assessments? Read the quotes below . . .
again and again, if you are.

Yes, the right frame of mind is called right A T T I T U D E, all caps for emphasis. If you are not yet inspired, read the story
of David and Goliath in the holy Bible. . . .. Believe you can, and you can!!!.

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Let us continue our study of the accounting cycle.

Steps in the Accounting Cycle:

1. Identifying and Analyzing – finished

2. Recording or Journalizing - finished
3. Posting to the Ledger –It is done by transferring the data in the Journal to the General Ledger for
classification.
4. Preparing the Unadjusted Trial Balance –It aims to periodically test the equality of the total debits and
total credits in the general ledger. Normally, this is done at the end of each month.

Posting to the General Ledger

General Ledger (GL) is the book of final entry while the Journal is the book of original entry.

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The best way to explain the purpose of the general ledger is through a diagram:

Explaining the purpose of the General Ledger is perhaps a difficult task. One reason is because in this age of computers
and information technology, the General Ledger does not any longer have an easily identifiable physical form. Most large
companies have their own system that will post transactions daily to the Journal then to the General Ledger and from the
Ledger to the Subsidiary Ledgers. And all the Accountant has to do is print a daily report, perform reconciliation of
balances between the General Ledger and Subsidiary Accounts and maintain a permanent file of these reports.
For companies that are still using the manual system, the standard format of the general ledger for Cash is shown below:

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There are three columns for recording money - Debit, Credit and Balance. There is one page in the General Ledger for
each Account, and typically the number of Accounts will be many, depending on the Chart of Accounts.
The manual process of posting involves transferring the date, debit and credit totals of accounts from the General Journal
to the G/L. A recorded journal entry is copied to its specific account in the GL.
Purpose: To classify the effects of business transactions according to the five (5) elements of financial statements:
Assets, Liabilities, Owner’s Equity, Income and Expense. This will greatly help the accountant to prepare the financial
statements in an orderly and timely manner.
For classroom discussion, we will be using the informal form of the G/L which is the T-account.

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 https://www.wallstreetmojo.com/t-accounts/

Example:
On January 02, 2020, Pedro Penduco started his locksmith business investing cash of P10,000.

Journal Entry:

DATE ACCOUNT TITLE DEBIT CREDIT

Jan 02, 2020 Cash P10,000
P. Penduco, Capital P10,000

GENERAL Ledger

Proceed to the Drill 1 portion of the module

The Trial Balance

ACCT 1026 – Financial Accounting and Reporting | 21

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Some Important Notes:

• Correct results of posting depend to a great extent on the correctness of the entries in the general journal

• Errors in journalizing should be avoided as much as possible because any error in the journal entries such
as wrong amounts or wrong accounts debited and credited will lead to wrong results of posting

Proceed to Drill 2 of the module.

Trial Balance out of balance if the total debits and total credits are not equal. This is a positive proof of the existence of
one or more errors.

The chief causes of errors are:

1. Posting an item to the wrong side of the account

2. A mistake in copying when transferring a balance from the ledger account to the trial balance.
3. Omission of the posting of either a debit or credit entry in the journal.
4. Posting the same item twice
5. Wrong addition or subtraction in finding the balance of an account.

Location of Errors
The following guides may help in the prompt location of errors:

• A difference of P0.01, P0.10, P1, P100, etc. suggests that an error has been made in addition or
subtraction

• A difference of 9 or a multiple of 9 indicates transposition, that is, the order of the figures is reversed. For
example, 25 is written as 52 or 38 is written as 83.

• A difference divisible by 2 indicates an error in posting to the wrong side of the account or entering the
account balance in the wrong column of the trial balance.

• A difference divisible by 9 or 99 indicates a slide or misplacement of a decimal point. For example, P50 is
written as P5.00.

Tip: If the trial balance is out of balance, a good plan to locate the error/s is to check the work from the trial
balance to the journal entries rather than from the journal entries to the trial balance.
Assessment/Evaluation: Answers to this page is to be written in a separate sheet of paper.

DRILL 1: JOURNALIZING AND POSTING

ACCT 1026 – Financial Accounting and Reporting | 22

This document is a property of University of Saint Louis Tuguegarao. It must not be reproduced nor transmitted
in any form, in whole or in part, without expressed written permission.
The following were the transactions of Entity A during the period:
Date Transactions
Jan. 8 Services worth ₱150,000 were rendered for cash.
Jan. 9 Services worth ₱200,000 were rendered on account.
Jan. 10 Cash amounting to ₱25,000 was disbursed for advertising expense.
Jan. 11 Accounts receivable of ₱180,000 was collected.
Jan. 12 The owner made a temporary withdrawal of ₱10,000 cash from the business.

Requirements:
a. Provide the journal entries.
b. Post the journal entries to the ledger then determine the ending balances of the accounts. Use ledger accounts for
this purpose. Arrange the accounts in this order: Assets, Liabilities, Equity, Income and Expenses.

DRILL 2: JOURNALIZING, POSTING AND UNADJUSTED TRIAL BALANCE

Entity A started operation on January 1, 20x1. The following were the transactions during the first week of operations:

Jan. Transactions
1 The owner provided ₱600,000 cash as initial investment to the business.
2 The business acquired a building for ₱400,000 cash.
3 The business acquired office equipment for ₱100,000 cash.
4 The business purchased supplies for ₱20,000 cash. The business uses a prepaid asset account.
5 The business rendered services worth ₱150,000 on cash basis.
6 The business rendered services worth ₱100,000 on account.
7 The business paid ₱25,000 salaries expense.

Requirements:
a. Provide the journal entries.
b. Post the journal entries to the ledger. Arrange you’re the accounts in this order: Assets, Liabilities, Equity, Income
and Expenses.
c. Prepare the unadjusted trial balance.

ACCT 1026 – Financial Accounting and Reporting | 23

This document is a property of University of Saint Louis Tuguegarao. It must not be reproduced nor transmitted
in any form, in whole or in part, without expressed written permission.