Chapter FOUR UNIVERSITY OF LA SALETTE, INCORPORATED I SENIOR HIGH SCHOOL

THE JOURNAL, THE LEDGER AND

THE TRIAL BALANCE
FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 1
WHAT TO EXPECT IN THIS CHAPTER?

The starting point in the accounting process is an analysis of the transactions of a business. A business
transaction is any financial event that changes the resources of a firm; for example, selling of merchandise,
paying of credited purchases, and collecting of customer’s payment are all business transactions.

The accountant must look at the effects of each business transaction to decide what information to record
and where to record it. Thus, the study of accounting begins with an investigation on how the accountant
analyzes.
Hi guys! I know it has been In this chapter, we are going to explore the process of recording business transactions in the books of the
tiring for you since the past few
business.
weeks. So before proceeding to
the next pages, make sure to
calm your mind and find your LET US ASSESS YOUR BEGINNER’S KNOWLEDGE:
Zen. INSTRUCTION: Indicate the effects of the following transactions in the form below and determine the ending
balances of the accounts. Write your answer on the space provided in the answer sheet. Good luck and do your
Do not lose focus. It will all be best!
worth it in the end.
During the month of January, Mr. Maximo Leviticus, a lawyer, had the following transactions:
BUCKLE UP! 1. Invested P 350,000.00 to open his legal practice.
In this chapter, you are
2. Bought office supplies on account, P15,000.00.
about to learn how to:
3. Borrowed P100,000.00 from a bank.
4. Paid P 15,000.00 on the account for the office supplies.
 analyze common 5. Paid P 50,000.00 of the amount borrowed from a bank.
business transactions
using the rules of debit
Assets Liabilities Owner’s Equity
and credit;
Cash Office Supplies Accounts Payable Loans Payable Leviticus, Capital
 determine the normal
1.
balance of an account;
2.
 analyze business
3.
transactions;
4.
 prepare journal entries
5.
to record basic
business transactions;
 determine balances of
accounts using the How is it? Were you able to analyze the effect of the following transactions? Take this as a review of the lessons
general ledger; and from the previous quarter and as an opener for the lessons of this quarter.
 prepare a trial balance.
Send a private message on my messenger account: Wilbelle Reyes Hernandez and I’ll send the answer key for
this activity.
CHECKPOINT 1 THINK AND OBSERVE
There is a rule when recording business transactions that we must always remember: “FOR EVERY VALUE
RECEIVED, THERE MUST BE A VALUE GIVEN UP” thus the concept that for every transaction there are two or
more accounts that are affected. Assess how the transaction directly changes the entity’s financial condition or
directly affects its results of operation. Put a checkmark on your answer. Choose among the following effects:
(1) No accounts are affected.
(2) Two accounts are increased.
(3) Two accounts are decreased.
A typical business entity (4) One account increase, the other account decreased.
engages in hundreds or TRANSACTIONS 1 2 3 4
even thousands of different 1.Reyes invested money for his home repair business.
transactions each day. 2.Reyes bought a plowing machine from A Co. on credit for
Accountants do not record P150,000.

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all transactions that occur. 3.Reyes bought Shop Supplies and paid cash worth P30,000.
Basically, only business 4.Reyes’ only employee died due to a work-related accident. He
transactions that: used his personal cash to pay for the employee’s burial. It
amounted to P 150,000.
5.Reyes received a bank loan for business use amounting to
1. affect the entity’s assets, P100,000.
liabilities and owner’s 6.Reyes hired two new employees. The contract stated that they
equity; and will be paid P14,000 and an additional 20% for every home
repair services.
2. can be measured in 7.Paid P50,000 to A Co. partially.
monetary terms. 8.Paid the monthly rent for the office worth P 10,000.

9.Reyes billed a customer worth P20,000 and received a partial

payment of P10,000.
10.Reyes withdrew P10,000 for his personal use.
PUT ON YOUR EXPLORATION BOOTS!

What is the concept mentioned from the “engage activity”?

The owners and managers It is what we call the duality concept of accounting. It is a fundamental convention of accounting that necessitates
of a business looks on the recognition of all aspects of an accounting transaction. This concept states that “for every value received,
their financial statements there is a value given up”, it means that in every accountable transaction, we must look for at least two accounts
as a coach looks on the that are affected which need to be recorded.
scoreboard and team
Duality concept is the underlying basis for double-entry bookkeeping system. Before this system emerged,
statistics showing the
there was the single-entry bookkeeping system, that is still widely used in the micro-businesses which keeps an
results of the present game informal record of receipts and payments.
as well as the team’s
standing. In a single-entry bookkeeping system, only one aspect of a transaction is recognized. For instance, if a sale is
made to a customer, only sales revenue will be recorded. However, the other side of the transaction relating to the
An accountant can only receipt of cash or the grant of credit to the customer is not recognized.
provide a comprehensive Why do you think it is important to recognize all the aspects of an accounting transaction?
financial statement if he or
she has a good foundation
of the basics.

DOUBLE-ENTRY BOOKKEEPING SYSTEM

What is the Double-Entry Bookkeeping System?

Every transaction affects two accounts. If we want to show the effect of every transaction on the accounting
elements, we need to record the effect of the transaction on each of the two accounts.
NOTES
___________________ Example 1: When you buy materials for manufacturing, the value you received the materials and the
___________________ value given up is the money used to buy the materials.
___________________
Example 2: The owner invests cash amounting to ₱100,000 into the business; the entity recognizes both
___________________ the increase in Cash and the increase in Owner’s capital. It would be incomplete to record only the
___________________ increase in Cash account without recording the increase in Owner’s capital.
___________________
___________________ This means that there will always be two entries to be recorded; one entry to record the increase or decrease in
one account; and another entry to record the increase or decrease in the other account.
___________________
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___________________ The recording of the dual effects of the transaction keeps the fundamental equation “Assets (A)= Liabilities (L) +
___________________ Owner’s Equity (OE)” in balance. This system of recording is called the “double-entry bookkeeping” system.
___________________
This system does not mean that transactions are recorded twice. It simply means that the accounting system
___________________ recognizes and records the dual effects of each transaction.
___________________
___________________
___________________ Bear in mind that we use accounts to record the effects of the transactions on
___________________ the specific asset, liability and owner’s equity. It is important, therefore, that
you are also familiar with the different assets, liabilities and owner’s equity
___________________ accounts because they are an indispensable tool when using the double
___________________ entry system of recording transactions.
___________________
___________________ Double-entry bookkeeping system is devised to account for all aspects of a transaction. Under the system,
___________________ aspects of transactions are classified under two main types:
___________________
___________________ 1. Debit- an entry that is made on the left side of the account. It also means value received or value paid
for.
___________________ 2. Credit- an entry that is made on the right side if the account. It also means value given up or value
___________________ parted with.
___________________
___________________ THE RULES OF DEBIT AND CREDIT
___________________ The classification of debit and credit effects are structured in such a way that for each debit there is a
corresponding credit and vice versa. Hence, every transaction will have ‘dual’ effects (i.e. debit effects and credit
___________________ effects).
___________________
___________________ Business transactions cause the accounts to change. Debits and credits are used to record the increases or
___________________ decreases in the accounts. As long as you know the normal balance of the account, recording of transactions is
___________________ easy, provided you know the following rules of debits and credits.
___________________ RULE OF DEBIT:
___________________
___________________
___________________ If the normal balance of an account is DEBIT,
___________________ debiting the account will cause that account
to increase; while crediting the account will
___________________ cause it to decrease.
___________________
___________________ Hence, we can record the increases and
___________________ decreases in asset accounts as follows:
___________________
___________________
___________________ RULE of CREDIT
___________________
___________________
___________________
If the normal balance of an account is CREDIT,
___________________ crediting the account will cause the account to
___________________ increase; while debiting the account will cause it to
___________________ decrease.
___________________
___________________
___________________
___________________
___________________ Observe that the rules for liabilities and owner’s equity are the same, but they are the opposite of those for assets.
___________________ This is because liabilities and owner’s equity are on the opposite side of the equation and, therefore, follow
opposite rules.
___________________
___________________
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___________________ A business transaction may have any or a combination of the following two-fold effects on the balance
___________________ sheet elements:
___________________  Increase in an asset that at the same time increases equity.
___________________  Increase in an asset that at the same time increases liability.
___________________  Decrease in an asset that at the same time decreases equity.
___________________  Decrease in an asset that at the same time decreases liability.
___________________  Increase in one form of asset that at the same time decreases another form of asset.
 Increase in one form of liability that at the same time decreases another form of liability.
___________________  Increase in one form of equity that at the same time decreases another form of equity.
___________________
___________________ The equity of an owner is affected by the profit (or net income) or loss (or net loss). A transaction that
___________________ involves an income or an expense will affect the owner’s equity in any combination of the following ways:
___________________  Increase in an income (revenue or gain) results in an increase of equity.
 Decrease in an income (revenue or gain) results in a decrease of equity.
___________________  Increase in an expense (or loss) results in a decrease of equity.
___________________  Decrease in an expense (or loss) results in an increase of equity.
___________________
___________________ Likewise, an increase or decrease in an income or expense element may affect an asset, a liability, or both
___________________ elements. The possible effects of income and expenses on assets and liabilities are summarized as
follows:
___________________  Increase in an income (revenue or gain) may result in an increase in an asset or a decrease in a liability.
___________________  Decrease in an income (revenue or gain) may result in a decrease in an asset or an increase in a liability.
___________________  Increase in an expense (or loss) may result in a decrease in an asset or an increase in a liability.
___________________  Decrease in an expense (or loss) may result in an increase in an asset or a decrease in a liability.
___________________
___________________ These are the rules of debit and credit. Every accountable event has a dual
___________________ but self-balancing effect on the accounting equation. Recognizing these
___________________ events in any manner will not affect the equality of the basic accounting
___________________ model.
___________________
___________________
NORMAL BALANCE OF THE ACCOUNTS
___________________
___________________ How do we know if we need to debit or credit an account?
___________________ We have what we call the normal balance of the account. The normal balance of the account indicates
___________________ the increasing side of the account. It can be drawn from the fundamental accounting equation:
___________________
___________________ Assets = Liabilities + Owner’s Equity
___________________ Observe that asset is placed on the left-hand side of the accounting equation while liabilities and owner’s
___________________ equity are on the right-hand side.
___________________
___________________ Assets = Liabilities + Owner’s Equity
___________________ LEFT = RIGHT
You must remember that debit means left and credit means right. Hence we can present the equation as:
___________________
___________________ Assets = Liabilities + Owner’s Equity
___________________ DEBIT = CREDIT
___________________
___________________ In the above presentation, we can say that:
___________________  The normal balance of ASSET accounts is DEBIT; and
___________________  The normal balance of LIABILITY and OWNER’S EQUITY accounts is CREDIT
___________________ Other accounts:
 Contra-Asset Account- Credit Balance
___________________  Owner’s, Drawing- Debit Balance
___________________  Income - Credit Balance
___________________  Expense -Debit Balance
___________________
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IN SUMMARY:

_______________________
Take a break for 15
minutes and then
proceed.
Rest your mind when
you need it. It helps you
maintain your efficiency
and effectiveness.
______________________________

TRY THIS!
Indicate the account type (Asset, Liability, Owner’s Equity, Income or Expense) and the normal balance of each of
the accounts on the space provided.

Account Type Normal Balance

1. Cash ___________________ ____________________
2. Accounts Payable ___________________ ____________________
3. Service Revenue ___________________ ____________________
4. Rent Revenue ___________________ ____________________
5. Rent Expense ___________________ ____________________
6. Prepaid Rent ___________________ ____________________
7. Salaries Expense ___________________ ____________________
8. Loans Payable ___________________ ____________________
9. Office Supplies ___________________ ____________________
10. Owner’s, Drawing ___________________ ____________________

LET’S CHECK YOUR PROGRESS

INSTRUCTION: Assess the effect of each transaction below by indicating which of the accounts should be debited
and credited. Follow the rules of debit and credit.

In the month of January, Moshe Brenn established the Moshe Watch Repair Shop.
1. Moshe Brenn invested P 300,000 cash in the business.
Great! I think you are 2. Bought watch testing equipment for cash worth P 120,000.
getting a hang of it. If you 3. Bought batteries and other repair parts from Omega Parts Company, P 24,000; payment is due in 30 days.
4. Bought a second-hand vehicle for P 250,000, paying P 150,000 down; the balance is due in 30 days.
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still have questions you 5. Paid the total amount due to Omega Parts Company.
can go back and watch the 6. Moshe Brenn invested his personal tools and testing devices in the business for ₱21,000.
pre-recorded video or you ASSET LIABILITY EQUITY INCOME EXPENSES
can contact me through 1 Ex. DEBIT NO EFFECT CREDIT NO EFFECT NO EFFECT
messenger @ Wilbelle 2
Reyes Hernandez. 3
4
List down your questions
in a paper so that you will 5
not forget it. 6
THE ACCOUNTING CYCLE
CHECKPOINT 2 The accounting cycle refers to a series of sequential steps or procedures performed to accomplish the accounting
process. The steps in the cycle and their aims follow:

Information provided by a
set of financial statements
is essential to any
individual analyzing a
business or other
organization. The
availability of a fair
representation of a
company’s financial
position, operations, and
cash flows is invaluable for
a wide array of decision
makers. However, the
sheer volume of data that
a company such as
Universal Robina, Jollibee
Foods Corporation, or
Ayala Corporation must
gather in order to prepare
these statements has to be
astronomical. Even a
small enterprise—a local
convenience store, for
example—generates a
significant quantity of
information virtually every
day.

How do you think

accountant begin the
process of accumulating all
the necessary data so that
financial statements can
eventually be produced?

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University of La Salette, Inc. High School| Senior High School
NOTES RECORDING AND CLASSIFYING PROCESS
___________________ In this chapter, we are going to discuss the entire phase 1 which includes step 1 to 4 of the accounting cycle:
___________________
___________________
___________________
___________________
___________________
___________________ BUSINESS SOURCE DOCUMENTS
___________________ We don’t analyze transactions out of the blue, accountants use reliable source documents to objectively support
___________________ the business transactions.
___________________ All business transactions that are taken up in the accounting records should be supported by appropriate source
___________________ documents. It is necessary that the reported information can be easily traced back to the supporting evidences.
___________________ Therefore, it is important that all source documents are properly prepared, compiled and controlled.
___________________
___________________ What source documents are considered reliable?
___________________
___________________
Usually, original documents are considered better source documents than duplicates or copies. Source
___________________ documents coming from independent outside parties are considered as neutral and more objective evidences of
___________________ transactions than those coming from within the business enterprise.
___________________
___________________ Remember that a supporting document from within the enterprise is recorded in the books of accounts only after
an authorized officer or officers of the enterprise have approved it for recording.
___________________
___________________ Examples of source or supporting documents:
___________________
___________________ Official Receipts, Disbursement Vouchers, Charge Sales Invoices, Cash Sales Invoice, Delivery Receipts,
___________________ Purchase Order Letters, Requisition Forms, IOUs, Promissory Notes, Drafts, Statements Of Account, Bills, Bank
Passbooks, Bank Passbooks, Bank Statements, Validated Deposit Slips, Bank Withdrawal Forms, Debit And
___________________
Credit Memoranda, Time Records, Payroll Slips, Payroll Sheets, Stock Certificates, Contracts, Memoranda Of
___________________ Agreement, Business Letters, Minutes Of Meetings, Registration Papers, Approved Journal Vouchers, and many
___________________ more.
___________________
___________________ BUSINESS TRANSACTIONS AND THEIR SOURCE DOCUMENTS
A hypothetical service enterprise, REYES REPAIR SHOP, is used in this module to illustrate, in an
___________________
integrated and comprehensive manner, the flow of the accounting work-- from the sorting of the source
___________________ documents to the closing of the books of accounts.
___________________
___________________ Given in the following table are the business transactions together with the source documents that could have
___________________ supported these business transactions.
___________________
Business Transactions Source Documents
___________________ 1. The owner invested her savings in a repair Official Receipt issued by the business to the owner.
___________________ shop business.
___________________ 2. Bought shop tools on cash basis. Supplier's Sales Invoice , Delivery Receipt , Payment
___________________ Voucher, Seller's Official Receipt
___________________ 3. Bought equipment on credit term. Supplier's Sales Invoice , Delivery Receipt
4. Paid business permits to the government. Registration Papers , Payment Voucher , Official
___________________
Receipt issued by the government
___________________ 5. Bought shop supplies on cash basis. Supplier’s Sales Invoice , Delivery Receipt, Payment
___________________ Voucher, Seller's Official Receipt
___________________ 6. Bought shop supplies on credit term. Supplier’s Sales Invoice , Delivery Receipt
___________________ 7. Borrowed money from a finance company, Official Receipt Issued By The Business To The
___________________ to be used to meet the cash needs of the Finance Company, Loan Agreement
shop.
___________________
8. Rendered repair services to customers in Cash Sales Invoice, Job Ticket
___________________ exchange for cash
___________________
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___________________ 9. Rendered repair services Charge Sales Invoice , Job Ticket , Statement of
___________________ Account
10. Paid the seller of equipment in full. Payment Voucher, Official Receipt Issued By The
___________________ Supplier
___________________ 11. Collected from the customers to apply on Official Receipt issued by the business to the
___________________ account for services rendered on credit. customer, Statement of Account
___________________ 12. Paid the wages of the shop assistant. Payment Voucher, Time Record, Payroll Slip, Payroll
___________________ Sheet
___________________ 13. Paid the rent of the space for two months. Payment Voucher , Official Receipt issued by the
lessor, Lease Contract
___________________ 14. Collected cash for renting out a small corner Official Receipt issued by the business to the tenant,
___________________ of the shop Statement of Account
___________________ 15. Took home some cash from the business’ Payment Voucher
___________________ collections, for her family use.
___________________ STEP 1: TRANSACTION ANALYSIS
___________________
___________________ What are business transactions?
___________________ All business enterprises become a party, directly or indirectly, to various financial activities or events. These
___________________ activities and events that occur during a given period of time, if they affect the business' financial condition
and are capable of being assigned monetary values, are referred to as business transactions.
___________________
___________________ Events that affect the financial condition of the business, such as fire, theft, typhoon, accidents, and bankruptcy,
___________________ are also considered business transactions from the point of view of accounting.
___________________
How to analyze transactions?
___________________
___________________ All transactions, regardless of their complexity, can be stated in terms of their monetary effects on the three
___________________ elements of accounting-assets, liabilities and owner’s equity. In analyzing the effects of a transaction, always
remember that each transaction affects two items.
___________________
___________________ Answering the following questions will be helpful in your analysis:
___________________ 1. Is there an accountable business transaction?
___________________  You need to make sure that the transaction meets the criteria for recognition in accounting.
___________________ 2. What are the accounts affected?
___________________  You need to identify the specific accounts affected by the transaction.
___________________ 3. What are the effects of the transaction?
 You need to know how the transaction affected the asset, liability and owner’s equity accounts.
___________________ 4. What side of account should it be entered?
___________________  You need to know what side you will enter the transactions to identify whether it increased or
___________________ decreased.
___________________ 5. How much did it increase or decrease?
___________________  You need to know the amount it increased or decreased by.
___________________ Situation (1): On September 18, Wilma Reyes started a repair shop by investing P200,000 cash.
___________________ Transaction Analysis:
___________________ Affected Element Affected Increase/ Side Amount
___________________ Account Decrease
___________________ Asset Cash Increase Debit P 200,000
___________________ Owner’s Equity W. Reyes, Increase Credit P 200,000
___________________ Capital
___________________
___________________ Situation (2): On September 20, the business entity bought an industrial power washer on credit for P 15,000.
Transaction Analysis:
___________________ Affected Element Affected Increase/ Side Amount
___________________ Account Decrease
___________________ Asset Machinery Increase Debit P 15,000
___________________ Liability Accounts Increase Credit P 15,000
___________________ Payable
___________________
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___________________ Situation (3): On September 22, the business entity bought wrenches, hammer and screwdrivers for cash,
___________________ P10,000.
Transaction Analysis:
___________________ Affected Element Affected Increase/ Side Amount
___________________ Account Decrease
___________________ Asset Tools Increase Debit P 10,000
___________________ Asset Cash Decrease Credit P 10,000
___________________
___________________ TRY IT YOURSELF!
___________________ Situation (4): On September 22, services were rendered by the business to clients for cash, P3,500.
___________________ Transaction Analysis:
___________________ Affected Element Affected Increase/ Side Amount
___________________ Account Decrease
___________________
___________________
___________________
Situation (5): On September 23, services were rendered by the business to clients on credit basis, P4,200.
___________________ Transaction Analysis:
___________________ Affected Element Affected Increase/ Side Amount
___________________ Account Decrease
___________________
___________________
___________________
___________________ Situation (6): On September 24, the business paid 50% of payable from the industrial power washer bought
on credit last September 20.
___________________
Transaction Analysis:
___________________ Affected Element Affected Increase/ Side Amount
___________________ Account Decrease
___________________
___________________
___________________ Send a private message on my messenger account: Wilbelle Reyes Hernandez and I’ll send the answer key for
___________________ this activity.
___________________ STEP 2: JOURNALIZING
___________________ What is a journalizing?
___________________
___________________ A careful analysis of a transaction would indicate which elements and accounts are affected, and how a business
transaction should be recorded or entered in the journal. The process of recording or entering a business
___________________ transaction in a journal is called journalizing. This unique style of recording is done through the preparation of
___________________ journal entries.
___________________
___________________ A journal could either be general journal or special journal, depending on the type of transactions that are
___________________ recorded therein. All types of business transactions can be recorded in a general journal, while, special journals
may be used to be able to group specific types of transactions in one book of original entry. For example, all cash
___________________ receipts may be recorded in a cash receipts journal, while all cash payments are taken up in a cash payments
___________________ journal.
___________________
___________________ The mechanics involved in the simultaneous use of general journal and special journals is covered in the topic of
___________________ accounting for merchandising operations. At this point discussions are limited to the use of general journal.
THE GENERAL JOURNAL
___________________
___________________ What is a general journal?
___________________ Business enterprises should keep certain financial records, called books of accounts, where the business
___________________ transactions are recorded classified and summarized. This becomes the basis for the preparation of the financial
___________________ statements and the other reports needed by the data users.
___________________
___________________ The most commonly kept books of accounts is the journals and the ledgers. These books are approved and
___________________ stamped by the Bureau of Internal Revenue (BIR) before any business transaction could be recorded therein.
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___________________ The nature of the business operations and the volume of transactions determine the type and number of journals
___________________ needed. The simplest type of journal is called the general journal. It is also called the book of original entry.
___________________ This journal is unique among others because it may be used to record any type of business transactions.
___________________ SAMPLE GENERAL JOURNAL
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________ Note: The accounting equation will be maintained as the debit entry will be accompanied by a credit entry.
The total debits should always equal total credits.
___________________
___________________ PARTS OF A GENERAL JOURNAL
___________________ A complete entry consists of:
___________________
___________________  The date of the transaction
___________________ The date of the journal entry is when the completed activity or event happened, as shown in the
source documents. Each page of the journal has a date column. This is where the date of a recorded
___________________ transaction is written or entered.
___________________
___________________  The accounts affected by the transaction
___________________ The accountant should be able to analyze and identify the two-fold effects of every transaction. He must
___________________ have the skill to determine which specific accounting elements increased and or decrease as a
___________________ result of the business transaction. He must be thoroughly familiar with the rules of debit and credit in
order to correctly express the effects of a transaction in the accounting elements.
___________________
___________________  The monetary value of debit and credit
___________________ Remember the assumption behind the double-entry bookkeeping system-- every business transaction
___________________ results in equal value received and value given up. This is the reason why the debits of each journal
___________________ entry of corresponding equal credits or vice versa.
___________________
The monetary values assigned on a journal entry are usually based on the amount of cash inflow or
___________________ outflow. If the transaction does not involve cash, the value assigned to the journal entry is equal to cash
___________________ peso value or the fair market peso value that is agreed upon between the parties involved.
___________________
___________________  The posting references showing the code of the destination ledger account
___________________ After the journal entries are prepared, the data therein are transferred to another book called a
___________________ ledger. The process of transferring the data from a journal entry to the particular ledger
___________________ account or accounts involved is called posting.
___________________ The debits and credits of each journal entry maybe posted daily, weekly, or monthly. The posting
___________________ reference permits a cross-referencing between the journal and the ledger. It also helps the
___________________ accountant to remember which debit and credit entries are already posted to the ledger, thereby
___________________ minimizing errors due to omissions or duplications.
___________________  A short explanation of the transaction
___________________ When the debit and credit account titles of a journal entry cannot sufficiently supply the information
___________________ that is relevant to the business transaction, then the explanation would provide such information.
___________________
___________________ Some examples of information that may be included in an explanation are: the specific purpose of
___________________ a payment, the source of a collection, the period covered by a bill, the terms of the sale or purchase,
___________________ specific kind of fixed asset both, the name of the customer or client, the term of the promissory note,
___________________ the purpose of the journal entry, and many more.
___________________
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University of La Salette, Inc. High School| Senior High School
___________________ The explanation of each journal entry must be useful, brief, direct, and clear. Avoid repeating the same
___________________ information that was directly or indirectly supplied by the account titles used in the journal entry. for
example, if the journal entry involves a debit to cash, it would be redundant to state an declamation that
___________________ cash was received period.
___________________
___________________ GUIDELINES ON HOW TO USE THE GENERAL JOURNAL
___________________ Labeling the journal
___________________ 1. At the top of the first page, write at the center the caption “GENERAL JOURNAL”.
2. At the rightmost side, write the page number of the journal. (GJ-01)
___________________ 3. On succeeding pages, only the page number of the journal is written.
___________________
___________________ Writing the date
___________________ 1. The column for the year, month, and day should be properly filled up.
___________________ 2. The year and the month should be written in every page.
3. Once written on a certain page, usually referring to the first transaction on that page, the month should
___________________ not be repeated.
___________________ 4. If there are two or more transactions in one day, the day should not be repeated.
___________________
___________________ Writing the debit and credit account titles and explanation
___________________ 1. The debit account title should be written first. The account title should be written adjacent the line that
divides the date column and the particular column. This means that there is no space between the line
___________________ and the first letter of the debit account title.
___________________ 2. The credit account title should be intended from the credit account title.
___________________ 3. Abbreviation of account title is not allowed.
___________________ 4. The explanation should be indented from the credit account title.
___________________ 5. There should be no blank space in recording succeeding transactions.
___________________ Writing the amount
___________________ 1. The debit amount should be written in the first money column in line with the debit account title.
___________________ 2. The credit amount should be placed on the second money column in line also with the credit account
___________________ title.
___________________ 3. The peso sign should be placed on the topmost debit and credit money columns only and it is
understood that the rest of the transactions are expressed in pesos. If there are no centavos, a dash sign
___________________ (-) is usually placed on the centavo column instead of writing two zeros.
___________________ 4. No comma and period should be used to indicate thousand pesos and cents. The lines in the money
___________________ columns are usually colored with specific meanings.
___________________ 5. Do not add the amounts on the money column.
___________________
EXAMPLE OF A COMPLETE JOURNAL ENTRY
___________________
___________________ Situation (1): On September 18, Wilma Reyes started a repair shop by investing ₱200,000 cash.
___________________ Transaction Analysis:
___________________ Affected Element Affected Increase/ Side Amount
___________________ Account Decrease
___________________ Asset Cash Increase Debit P 200,000
___________________ Owner’s Equity W. Reyes, Increase Credit P 200,000
Capital
___________________
___________________
Journal entry:
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
Fundamentals of Accountancy, Business and Management 1 Page | 11
University of La Salette, Inc. High School| Senior High School
___________________ Situation (2): On September 20, the business entity bought an industrial power washer on credit for P 15,000.
___________________ Transaction Analysis:
Affected Element Affected Increase/ Side Amount
___________________ Account Decrease
___________________
Asset Machinery Increase Debit P 15,000
___________________ Liability Accounts Increase Credit P 15,000
___________________ Payable
___________________
___________________ Journal entry:
___________________
___________________
___________________
___________________
___________________
___________________ Situation (3): On September 22, the business entity bought wrenches, hammer and screwdrivers for cash,
___________________ P10,000.
___________________ Transaction Analysis:
Affected Element Affected Increase/ Side Amount
___________________ Account Decrease
___________________ Asset Tools Increase Debit P 10,000
___________________ Asset Cash Decrease Credit P 10,000
___________________
___________________ Journal entry:
___________________
___________________
___________________
___________________
___________________
___________________
___________________ TRY IT YOURSELF!
___________________
___________________ Situation (4): On September 22, services were rendered by the business to clients for cash, P3,500.
___________________ Journal entry:
___________________
___________________
___________________
___________________
___________________
___________________ Situation (5): On September 23, services were rendered by the business to clients on credit basis, P4,200.
___________________ Journal entry:
___________________
___________________
___________________
___________________
___________________
___________________ Situation (6): On September 24, the business paid 50% of payable from the industrial power washer bought
___________________ on credit last September 20.
___________________ Journal entry:
___________________
___________________
___________________
___________________
___________________
Fundamentals of Accountancy, Business and Management 1 Page | 12
University of La Salette, Inc. High School| Senior High School
___________________ Send a private message on my messenger account: Wilbelle Reyes Hernandez and I’ll send the answer key for
___________________ this activity.
___________________  As you can see, the journal entries are based on the results of the transaction analysis. For as long as
___________________ you know how to analyze the effects of the transactions and you know the normal balance of the
___________________ accounts affected, preparing journal entries to record the transactions will be very simple.
___________________
___________________  The importance of understanding the concept of recording transactions in the journal cannot be
emphasized strongly enough, as this is the most important part of the accounting process. Your
___________________ understanding of this concept is a foundational understanding of the entire accounting process.
___________________
___________________ THE IMPORTANCE OF USING A JOURNAL
___________________  If we want to know about some certain transactions of years or months back, we can trace the said
___________________ transactions as long as we have the date of the said transaction. The entries in the journal are arranged by
___________________ date that makes it necessary to locate a particular event.
___________________  The process of classifying and sorting of the financial data is facilitated since both debit and credit account
titles and amounts are clearly and systematically reflected in the same page of the journal. It simplifies the
___________________ analysis of a business transaction if all its effects are right in front of the analyst.
___________________  The use of journal helps avoid emissions or duplications in the recording and posting processes. Since each
___________________ journal entry is equal debit and credit amounts, errors in recording and posting are easier to locate and trace.
___________________  The task of auditing the records become less difficult since the auditor could clearly see how the accountant
___________________ recorded each business transaction.
___________________
LET’S DIG DEEPER!
If you can recall, liabilities and equity can also be seen as the sources of the entity’s assets. This means
that for most of our transactions, we are going to deal with assets so you must know where to properly
classify it.

INSTRUCTION: Using the various categories given below, assign the following specific assets. Put a checkmark
on the space provided.
Cash Furniture and Delivery Office Office Supplies
Fixture Equipment equipment
_______________________ 1. Tables
Losing Focus? It’s okay 2. Trucks
to take a break. Eat a
snack or two, take a 30- 3. Laser Printer
minute nap and walk 4. Calculator
around your house for 5. Pencil
10-15 minutes.
______________________________ 6. Chairs
7. Stationary
8. Automobile
9. Debit Card
10. Coins

Send a private message on my messenger account: Wilbelle Reyes Hernandez and I’ll send the answer key for
this activity.

LET’S CHECK YOUR PROGRESS!

LET’S ACCOUNT YOUR PERSONAL TRANSACTIONS!
Activity 1. List down five (5) things that happened to you today that can be considered an accountable transaction
for you. (2pts each)
1.__________________________________________________________________________________________
__________________________________________________________________________________________
2.__________________________________________________________________________________________
Congratulations for __________________________________________________________________________________________
reaching this point, you’ve 3.__________________________________________________________________________________________
finished another lesson. If __________________________________________________________________________________________
you still have questions, 4.__________________________________________________________________________________________
__________________________________________________________________________________________
you can go back and 5.__________________________________________________________________________________________
watch the pre-recorded __________________________________________________________________________________________
Fundamentals of Accountancy, Business and Management 1 Page | 13
University of La Salette, Inc. High School| Senior High School
video or you can contact Activity 2. Write the journal entry for the above transactions you’ve mentioned. Use an account title you think that
me through messenger could represent your transactions. You can create your own account title. Remember to use the proper format in
journalizing.
@ Wilbelle Reyes
Hernandez. How will it be graded? Five (5) points is the maximum grade for each item. Answers will not be accepted if the rules
of debit and credit are not properly applied. A 1-point deduction will be made for every mistake in the format.
List down your questions
in a paper so that you will Transaction 1
not forget it.

Transaction 2

Transaction 3

Transaction 4

Transaction 5

CHECKPOINT 3

STEP 3: POSTING TO THE LEDGER

The good news is you have already done the hard part — you have analyzed the transactions and created the
A journal entry is like a journal entries. After journal entries are made, the next step in the accounting cycle is to post the journal entries into
set of instructions. The the ledger.
carrying out of these
instructions is known as Posting refers to the process of transferring entries in the journal into the accounts in the ledger. Posting to
posting. the ledger is the classifying phase of accounting.

When you post, you will not change your journal entries. If you debit an account in a journal entry, you will debit the
NOTES same account in posting. If you credit an account in a journal entry, you will credit the same account in posting.
___________________
___________________ They can be posted either to a T-account or a general ledger. Remember – a ledger is a listing of all transactions
___________________ in a single account, allowing you to know the balance of each account. The ledger for an account is typically
___________________ used in practice instead of a T-account but T-accounts are often used for demonstration because they are quicker
and sometimes easier to understand. The general ledger is a compilation of the ledgers for each account for a
___________________ business.
Fundamentals of Accountancy, Business and Management 1 Page | 14
University of La Salette, Inc. High School| Senior High School
___________________ THE GENERAL LEDGER
___________________ The general ledger refers to the accounting book in which the accounts and their related amounts as recorded
in the journal are posted to periodically. It is also called the “book of final entry” because all the balances in
___________________
the ledger are used in the preparation of financial statements.
___________________
___________________ A general ledger represents the record-keeping system for a company's financial data with debit and credit
___________________ account records validated by a trial balance. The general ledger provides a record of each financial transaction
___________________ that takes place during the life of an operating company.
___________________
The general ledger holds account information that is needed to prepare the company's financial statements, and
___________________
transaction data is segregated by type into accounts for assets, liabilities, owners' equity, revenues, and expenses.
___________________ SAMPLE GENERAL LEDGER (1)
___________________ This is the format used for general ledger before. We call this the two-column general ledger.
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________ SAMPLE GENERAL LEDGER (2)
___________________ This is the present format used for general ledger. We call this the three-column general ledger.
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
PARTS AND GUIDELINES IN FILLING OUT THE GENERAL LEDGER
___________________
The ledger consists of:
___________________  The account portion (the topmost part) refers to the account title for example: cash, accounts
___________________ receivable.
___________________
___________________  The account number is an assigned number for each account title to facilitate ease in recording and
___________________ cross-referencing. Enter the account number in the posting reference column (right side of the account
name) of the ledger.
___________________
___________________  The date column identifies when the transaction happened. Transfer the date of the transaction from
___________________ the journal to the ledger.
___________________
___________________  The explanation represents the source journal and the nature of the transactions.
___________________  The post reference (PR) identifies the page number of the general or special journal from which the
___________________ information was taken.
___________________
___________________  The Debit (Dr.) and Credit (Cr.) columns are used in recording the amount of transactions from the
___________________ general journal or special journal. Post the debit figure from the journal as a debit figure in the ledger
and the credit figure from the journal as a credit figure on the ledger.
___________________
___________________  The Balance Column represents the running balance of the “account” after considering the debit and
___________________ credit amounts.
Fundamentals of Accountancy, Business and Management 1 Page | 15
University of La Salette, Inc. High School| Senior High School
___________________ EXAMPLE OF POSTING TO THE GENERAL LEDGER
___________________ Journal entry (1):
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________ Posting to the ledger:
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
Journal entry (2):
___________________
___________________
___________________
___________________
___________________
___________________
___________________ Posting to the ledger:
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________ Journal entry (3):
___________________
___________________
___________________
___________________
___________________
___________________
Posting to the ledger:
___________________
___________________
___________________
___________________
___________________
___________________
Fundamentals of Accountancy, Business and Management 1 Page | 16
University of La Salette, Inc. High School| Senior High School
___________________
___________________
___________________
___________________
___________________
___________________
___________________ TRY IT YOURSELF!
___________________ Situation (4): On September 22, services were rendered by the business to clients for cash, P3,500.
___________________ Posting to the ledger:
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________ Situation (5): On September 23, services were rendered by the business to clients on credit basis, P4,200.
Posting to the ledger:
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________ Situation (6): On September 24, the business paid 50% of payable from the industrial power washer bought
___________________ on credit last September 20.
___________________ Posting to the ledger:
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________
___________________ Send a private message on my messenger account: Wilbelle Reyes Hernandez and I’ll send the answer key for
this activity.
___________________
Fundamentals of Accountancy, Business and Management 1 Page | 17
University of La Salette, Inc. High School| Senior High School
___________________ LEDGER ACCOUNTS AFTER POSTING
___________________ At the end of an accounting period, the debit or credit balance of each account must be determined to enable us
to come up with a trial balance. The following must be observed in the process of posting:
___________________  Each account balance is determined by footing (adding) all the debits and credits.
___________________  If the sum of an account’s debit is greater than the sum of its credits, that account has a debit balance.
___________________  If the sum of its credits is greater, that account has a credit balance.
___________________ GENERAL LEDGER RECONCILIATION
___________________
What is a general ledger reconciliation?
___________________
___________________ When we say we’re “balancing the books,” the general ledger is what we’re referring to. The important thing to
___________________ remember is that each transaction must have an equal and opposite transaction. When your bookkeeper
___________________ reconciles your general ledger, she works side-by-side with your financial controller to make sure that all the
credits and debits are recorded in the correct places and that nothing seems out of place or unusual.
___________________
___________________ General ledger reconciliation is one of the key procedures to maintain timely and accurate bookkeeping for
___________________ businesses. A reconciled general ledger, completed according to GAAP principles of accounting, is the
___________________ cornerstone to understanding your company’s financial status, spotting incidences of theft, and pinpointing
___________________ inaccuracies in your records.
THE IMPORTANCE OF RECONCILING A LEDGER
___________________  Provides a basis to check all other financial statements for accuracy.
___________________  Offers a complete, accurate record of your company’s financial activity.
___________________  Helps you spot theft within 30 days of its occurrence, hopefully while the losses are still small and manageable.
___________________  Helps you spot runaway spending so you can make adjustments and improve your company’s financial health.
___________________ STEP 4: PREPARATION OF A TRIAL BALANCE
A trial balance is a bookkeeping worksheet in which the balance of all ledgers are compiled into debit and
___________________ credit account column totals that are equal. A company prepares a trial balance periodically, usually at the end
___________________ of every reporting period, but it is created before adjustments are made, that is why we also call it the unadjusted
___________________ trial balance. The general purpose of producing a trial balance is to ensure the entries in a company's
___________________ bookkeeping system are mathematically correct.
___________________
Preparing a trial balance for a company detects any mathematical errors that have occurred in the double-entry
___________________ accounting system. If the total debits equal the total credits, the trial balance is considered to be “balanced”,
___________________ and there should be no mathematical errors in the ledgers.
___________________
___________________ However, this does not mean there are no errors in a company's accounting system. For example, transactions
___________________ classified improperly or those simply missing from the system could still be material accounting errors that would
not be detected by the trial balance procedure.
___________________ EXAMPLE OF AN UNADJUSTED TRIAL BALANCE
___________________
___________________
___________________
REFERENCES:
BOOKS
 Salosagcol, J. (2018).
Accounting. Manila, PH:
RE LEONE Publishing.
 Kimwell, M.B. (2005).
Fundamentals of
Accounting: 2nd Edition.
Manila, PH: Conanan
Educational Supply.
 Ballada, W. (2017).
Fundamentals of
Accountancy, Business
and Management 1:
Made Easy. Manila, PH:
DomDane Publishers.
Fundamentals of Accountancy, Business and Management 1 Page | 18
University of La Salette, Inc. High School| Senior High School
 Manalo, M.V. (2016). GUIDELINES IN CREATING THE TRIAL BALANCE
Learning to succeed in Here are the following steps in preparing the trial balance:
business with •List the account titles in numerical order.
Accounting Vol. •To the right of the account titles are two columns for entering each account's balance. One column is headed
1.Quezon City, PH: DEBIT and the other column is headed CREDIT.
•Each account's balance is listed in the appropriate column.
Phoenix Publishing
•After all of the account balances are entered, each column is summed.
House, Inc.
•Compare the Totals. The total of the debit column should be equal to the total of the credit column.
INTERNET WHY DO YOU NEED TO PREPARE A TRIAL BALANCE?
 A trial balance is a worksheet with two columns, one for debits and one for credits, that ensures a company’s
bookkeeping is mathematically correct.
 www.investopedia.com
 www.accountingverse.com
 The debits and credits include all business transactions for a company over a certain period, including the
sum of such accounts as assets, expenses, liabilities, and revenues.
 www.accountingcoach.com
 Debits and credits of a trial balance being equal ensure there are no mathematical errors, but there could still
 www.freshbooks.com
be mistakes or errors in the accounting system.
WHY DO YOU NEED TO PREPARE A TRIAL BALANCE?

All business establishments and taxpayers are required to keep a record of

their day-to-day transactions in order to properly account for the result of their
operations. The said record is referred to as the books of accounts.

The type of books a business maintains depends on many factors such as

_______________________ the size of the business and financial capacity. What we have discussed so
You did great! You far is the minimum number of reports the regulators require.
deserve a break. Eat
good food and sleep
early tonight. What do you think will happen if businesses fail to maintain and update the books required by the
______________________________
regulators?

LET’S CHECK YOUR PROGRESS!

Activity no. 1: POSTING TO THE LEDGER
Post the following transactions in the general ledger. Place your answer on the space provided in the answer sheet.

Congratulations for
reaching this point, you’ve
finished another lesson. If
you still have questions
you can go back and
watch the pre-recorded
video or you can contact
me through messenger
@ Wilbelle Reyes
Hernandez.
List down your questions
in a paper so that you will
not forget it.

Fundamentals of Accountancy, Business and Management 1 Page | 19

University of La Salette, Inc. High School| Senior High School
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________ Activity no. 2: TRIAL BALANCE
_________________
_________________ The accounts of Gallena Advertising Agency follow their normal balances as of September 30, 2020:
_________________
_________________ Accounts Balances
_________________ Gallena, Capital P 254,700
_________________ Insurance Expense 9,600
_________________ Accounts Payable 26,400
_________________
Service Revenues 258,000
_________________
_________________ Land 87,000
_________________ Cash 21,000
_________________ Salaries Expense 75,000
_________________ Building 375,000
_________________
Equipment Rentals Expense 15,000
_________________
_________________ Gallena, Capital 18,000
_________________ Utilities Expense 30,000
_________________ Accounts Receivable 28,500
_________________ Notes Payable 135,000
_________________
Supplies Expense 15,000
_________________
_________________
Required: Prepare a trial balance. Place it on the space provided in the answer sheet.
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________
_________________

Fundamentals of Accountancy, Business and Management 1 Page | 20

University of La Salette, Inc. High School| Senior High School

LET’S TEST YOUR KNOWLEDGE

General Instructions: Read the questions carefully and write your answers on the
space provided in the answer sheet.

I.TRUE OR FALSE. Write True if the statement is correct and False if not.

_________1. A transaction that is recorded in the journal is called a journal entry.

_________2. Assets are increased with debits and decrease with credits.
_________3. Liabilities are increase with debits and decrease with credits.
_________4. Recording a credit to all equity accounts will increase the account.
_________5. Journal entries can have more than two accounts as long as the debits equal the credits.
_________6. Normal balances are the side that increases the account balance.
_________7. When an account receivable is collected in cash, the total assets of the business increase.
_________8. The process of transferring the data from the journal to the ledger accounts is posting.
_________9. A notation in the post reference column of the general journal indicates that the amount has been posted to the ledger.
_________10. The order of the flow of accounting data is (1) record in the ledger, (2) record in the journal, (3) prepare the financial
statements.
II. CLASSIFICATION. Determine what type of transactions are the following. Write “PT” if it is a Personal Transaction, “ABT” if it is Accountable
Business Transaction, and “NBT” if it is a Non-Accountable Business Transaction.

__________11. Purchase of kitchen supplies for home.

__________12. Incidence of fire that destroyed business properties.
__________13. Payment of salaries for the company employees.
__________14. Payment of residential rentals.
__________15. Firing an employee because of grave misconduct.
__________16. Interest on personal borrowings of the owner.
__________17. Gas and oil expenses paid relating to the transportation between home to office.
__________18. Payment for the water bills of the factory.
__________19. Issuance of a purchase order to a supplier.
__________20. Loss due to theft or calamity.
__________21. The owner brings home some slightly used tables and chairs.
__________22. Signing of the contract of lease to a lessor.
__________23. Initial investment of the owner in the business.
__________24. Billed a client for services rendered.
__________25. Treating your employees to dinner.

Fundamentals of Accountancy, Business and Management 1 Page | 21

University of La Salette, Inc. High School| Senior High School
PART 1: WHAT ‘ACCOUNTING ’AM I?
Selected accounts from the ledger of Hernandez Company
appear below. For each account, indicate the following:

(a) In the first column at the right, indicate the nature of each account, using the following abbreviations:

Asset - A Revenue - R
Liability - L Expense - E
None of the above - N

(b) In the second column, indicate the increase side of each account by inserting Dr. or Cr.
(a) (b)
Account Type of Account Increase Side
(1) Supplies __________ __________
(2) Notes Receivable __________ __________
(3) Service Revenue __________ __________
(4) Hernandez, Capital __________ __________
(5) Accounts Payable __________ __________
(6) Salaries Expense __________ __________
(7) Copyright __________ __________
(8) Accounts Receivable __________ __________
(9) Equipment __________ __________
(10) Advance from customers __________ __________

Business Cases
Read the cases carefully and answer the following question:

Business Case #1 Ethics and Professional Conduct in Business

At the end of the current month, Gil Frank prepared a trial balance for College App Services. The credit side of the trial balance exceeds the debit
side by a significant amount. Gil has decided to add the difference to the balance of the miscellaneous expense account in order to complete the
preparation of the current month financial statement by five o’clock deadline. He'll look for the difference next week when he has more time.

Discuss whether Gil Frank is behaving in a professional manner. Write your answer on the space provided in the answer sheet.

Business Case #2 Debits and Credits

The following excerpt is from a conversation between Kate Purvis, the President and Chief Operating Officer of Light House Company, and her
neighbor, Dot Evers.

Dot: Kate, I’m taking a course in night school, “Intro to Accounting”. I was wondering—could you answer a couple questions for me?

Kate: Well, I will if I can.

Dot: Okay, our instructor says that it’s critical we understand the basic concepts of accounting, or we’ll never get beyond the first test. My
problem is with those rules of debit. You know, assets increase with debit, and decrease with credits, etc.

Fundamentals of Accountancy, Business and Management 1 Page | 22

University of La Salette, Inc. High School| Senior High School
Kate: Yes, pretty basic stuff. You just have to memorize the rules. It shouldn’t be too difficult.

Dot: Sure, I can memorize the rules, but my problem is I want to be sure I understand the basic concepts behind the rules. For example,
why can’t assets be increased with credits and decreased with debits like revenue? As long as everyone did it that way, why not? It would
seem easier if we had the same rules for all increases and decreases in accounts. Also, why is the left side of an account called the debit
side? Why couldn’t it be called something simple… like the “LE” for Left Entry? The right side could be called just “RE” for Right Entry.
Finally, why are there just two sides to an entry? Why can’t there be three or four sides to an entry?

After reading the conversation of Kate and Dot, help Kate answer Dot’s questions. Write your answer on the space provided on the answer sheet.

Title: Journal to Trial

Balance
Innovative Designs Company, owned by Mark Ronquillo, has been operating for two years. Below is a series of transactions. For
each transaction, indicate the accounts that should be debited and credited. If no journal entry is required, write “n/a” in the columns.
Use the following account titles: Cash; Accounts Receivable; Supplies; Prepaid Expenses; Equipment; Accounts Payable; Notes
Payable; Salaries Payable; Ronquillo, Capital; Ronquillo, Drawings; Service Revenues, Supplies Expense and Operating expenses.

Sept. 2 Purchased equipment for use in the business , paid 1/3 cash and gave a note payable for the balance, P85,000.
4 Paid Cash for salaries, P23,500.
5 Purchased supplies for inventory on credit, to be used later, P 15,000.
9 Paid operating expenses incurred this period, P 4,500.
12 Incurred operating expenses this period to be paid next period, P2,500.
16 Used some of the supplies from inventory for operations, P12,000.
20 Performed services this period on credit, P25,000.
23 Paid cash on account payable for supplies bought on credit last September 5.
26 Collected cash on accounts receivable for services performed last September 26.
30 On the last day of the current period, paid cash for an insurance policy covering the next 12 months, 120,000.
Required:
1. Prepare the journal entries.
2. Post the transactions in the ledger.
3. Prepare a trial balance.

Fundamentals of Accountancy, Business and Management 1 Page | 23

University of La Salette, Inc. High School| Senior High School

The accounting process starts by A system of debits and credits is Balancing of ledgers means finding
analyzing the effect of utilized to record changes in the the difference between the debit and
transactions—any event that has a balancing of accounts and the credit amounts of a particular
financial impact on a company. equation in the general journal. account i.e. heavier total and lighter
Large organizations participate in Traditional journal entry format total difference and recording that
literally millions of transactions dictates that debited accounts are difference amount on the lighter total
each year that must be gathered, listed before credited accounts. side. Then afterwards, you prepare
sorted, classified, and turned into a For each entry, you will record the the trial balance, a type of financial
set of financial statements that transaction date, title, and report that is generated at the end of
cover a mere four or five pages. description of the event. Despite an accounting period, prior to the
Over the decades, accountants the volume of transactions, the creation of your financial
have had to become very efficient goal remains the same: to statements. Its main purpose is to
to fulfill this seemingly impossible prepare financial statements allow you to catch any accounting
assignment. that are presented fairly errors and then make any
because they contain no necessary adjustments, so that your
material misstatements. financial statements are completely
accurate.

Fundamentals of Accountancy, Business and Management 1 Page | 24

University of La Salette, Inc. High School| Senior High School
Appendix:
The following are the list of accounts that you are most likely to encounter in recording business transactions. Please take time to
familiarize yourself with these accounts as you will need them in analyzing business transaction:
In actual situations, business entities would have a list of accounts that they use to record their transactions. This list, with a brief
explanation of the nature of each account, is known as the “CHART OF ACCOUNTS.” The chart of accounts serves as a guide in
determining which particular account to use when recording business transactions.

ASSETS
Current Assets
 Cash-coins, bills, checks and other cash items, on hand and in banks.
 Accounts Receivables-amounts collectible from customers for the sale of goods and services.
 Notes Receivables-amounts receivable that are evidenced by a promissory note.
 Accrued Revenue-receivable for the value of services earned but not yet collected. Common examples are Interest
Receivable and Rent Receivable.
 Merchandise Inventory-goods for sale in the ordinary course of business.
 Prepaid Expenses-advance payments for services or rights to be received within the year such as Prepaid Rent and Prepaid
Insurance, Office Supplies, Factory Supplies and Unused Stationery Supplies.

Non-current Assets
 Land-lot presently used in the business.
 Building-buildings used in the business.
 Furniture and Fixtures-chairs, tables, fixtures, filing cabinets, shelves and other fixtures.
 Office Equipment-typewriters, adding machines, calculators, computers, copiers, fax machines and paper shredders.
 Delivery Equipment-trucks, vans and other equipment for delivery of goods to customers.

LIABILITIES
Current Liabilities
 Accounts Payable-amounts due to suppliers for the purchase of goods or services on credit.
 Notes Payable-obligations to pay evidenced by a promissory note.
 Accrued Expenses-liabilities for services already incurred but not yet paid. Common examples include Salaries Payable,
Interest Payable, Utilities Payable, and Loans Payable obligations due to banks for loans obtained.
 Unearned Revenue-liability for items already collected but not yet earned. Examples include Unearned Service Revenue and
Unearned Rent.

Non-Current Liabilities
 Mortgages Payable- The long‐term financing used to purchase property is called a mortgage. The property itself serves as
collateral for the mortgage until it is paid off. A mortgage usually requires equal payments, consisting of principal and interest,
throughout its term.
 Bonds Payable- a form of long term debt usually issued by corporations, hospitals, and governments. The issuer of bonds
makes a formal promise/agreement to pay interest usually every six months (semiannually) and to pay the principal or maturity
amount at a specified date some years in the future.
 OWNER’S EQUITY
 Owner’s Capital (W. Hernandez, Capital)-represents the owner’s investment or his equity in the business.
 Owner’s Drawing (W. Hernandez, Drawings)-represents the withdrawal made by the owner for his own personal use or in
anticipation of profits.

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REVENUES
 Service Revenue-represents amount earned for services rendered to customers.
 Sales-represents amount earned for the value of goods sold to customers.
 Commission Revenue-represents amount earned for commission services rendered to clients.
 Professional Fees-represents amount earned for professional services rendered to clients.
 Tuition Fees-represents amount earned for tuition fees of students.
 Rent Revenue-represents amount earned for rental of entity’s property.
 Interest Revenue-represents amount of interest earned.

EXPENSES
 Salaries Expenses-the value of compensation for services received from employees.
 Rent Expenses-represents the amount incurred for the use of property not owned by the entity.
 Insurance Expense-represents the expired portion of the amount of insurance premium paid.
 Advertising Expense-represents the amount incurred for the advertising services rendered by others in promoting the goods
or services of the entity.
 Taxes and Licenses Expense-amount incurred for business permits, taxes and licenses.
 Repair and Maintenance Expense-represents the amount incurred for the services or the parts used to repair or maintain
entity’s assets
 Utilities Expense- amount incurred for power, electricity and water.
 Supplies Expense-represents value of supplies used, specifically termed as Office Supplies Expense or Store Supplies
Expense.
 Depreciation Expense represents the portion of the property and equipment that expired during the period.

In designing chart of accounts, it is desirable to use account names that are concise and descriptive of the nature of the
account so that transactions can be easily assigned to an appropriate account.

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General Journal Page 1

Particulars/Explanation PR Debit Credit

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University of La Salette, Inc. High School| Senior High School

Appendix:
The following are the list of accounts that you are most likely to encounter in recording business transactions. Please take time to
familiarize yourself with these accounts as you will need them in analyzing business transaction:
In actual situations, business entities would have a list of accounts that they use to record their transactions. This list, with a brief
explanation of the nature of each account, is known as the “CHART OF ACCOUNTS.” The chart of accounts serves as a guide in
determining which particular account to use when recording business transactions.

ASSETS
Current Assets
Cash-coins, bills, checks and other cash items, on hand and in banks.
Accounts Receivables-amounts collectible from customers for the sale of goods and services.
Notes Receivables-amounts receivable that are evidenced by a promissory note.
Accrued Revenue-receivable for the value of services earned but not yet collected.Common examples are interest receivable and rent
receivable.
Merchandise Inventory-goods for sale in the ordinary course of business
Prepaid Expenses-advance payments for services or rights to be received within the year such as Prepaid rent and Prepaid insurance
Office Supplies Unused stationery and supplies for use in the office.

Non-current Assets
Land-lot presently used in the business.
Building-buildings used in the business.
Furniture and Fixtures-chairs, tables, fixtures, filing cabinets, shelves and other fixtures.
Office Equipment-typewriters, adding machines calculators, computers, copiers, fax machines, paper shredders.
Delivery Equipment-trucks, vans and other equipment for delivery of goods to customers.

LIABILITIES
Current Liabilities
Accounts Payable-amounts due to suppliers for the purchase of goods or services on credit.
Notes Payable-obligations to pay evidenced by a promissory note.
Accrued expenses-liabilities for services already incurred but not yet paid. Common examples include Salaries payable, Interest
payable and Utilities payable Loans Payable obligations due to banks for loans obtained.
Unearned revenue-liability for items already collected but not yet earned. Examples include Unearned service revenue and Unearned
rent.

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University of La Salette, Inc. High School| Senior High School
Non-Current Liabilities
Mortgages payable- The long‐term financing used to purchase property is called a mortgage. The property itself serves as collateral
for the mortgage until it is paid off. A mortgage usually requires equal payments, consisting of principal and interest, throughout its
term.
Bonds payable- are a form of long term debt usually issued by corporations, hospitals, and governments. The issuer of bonds makes
a formal promise/agreement to pay interest usually every six months (semiannually) and to pay the principal or maturity amount at a
specified date some years in the future.
OWNER’S EQUITY
Owner’s Capital (W. Hernandez, Capital)-represents the owner’s investment or his equity in the business.
Owner’s Drawing (W. Hernandez, Drawings)-represents the withdrawal made by the owner for his own personal use or in
anticipation of profits.
REVENUES
Service revenue-represents amount earned for services rendered to customers.
Sales revenue-represents amount earned for the value of goods sold to customers.
Commission revenue-represents amount earned for commission services rendered to clients.
Professional fees revenue-represents amount earned for professional services rendered to clients.
Tuition fees revenue-represents amount earned for tuition fees of students.
Rent revenue-represents amount earned for rental of entity’s property.
Interest revenue-represents amount of interest earned.

EXPENSES
Salaries expenses-the value of compensation for services received from employees.
Rent Expenses-represents the amount incurred for the use of property not owned by the entity.
Insurance Expense-represents the expired portion of the amount of insurance premium paid.
Advertising Expense-represents the amount incurred for the advertising services rendered by others in promoting the goods or
services of the entity.
Taxes and Licenses Expense-amount incurred for business permits, taxes and licenses.
Repair and Maintenance Expense-represents the amount incurred for the services or the parts used to repair or maintain entity’s
assets Utilities Expense amount incurred for power, electricity and water.
Supplies Expense-represents value of supplies used, specifically termed as Office Supplies Expense or Store Supplies Expense.
Depreciation Expense represents the portion of the property and equipment that expired during the period.

In designing chart of accounts, it is desirable to use account names that are concise and descriptive of the nature of the
account so that transactions can be easily assigned to an appropriate account.

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