LECTURE 3
REVIEW OF JOURNAL ENTRIES
Journal – is a chronological record of events or business transactions showing all the effects of each
transaction in terms of debits and credits.
Simple and Compound Entry
When only two accounts are affected, we call this a simple entry where there is only one debit and one
credit account. In some cases, a transaction would require the use of three or more accounts in which
case the entry is called a compound entry.
Rules for Debit and Credit
You Debit to show: You Credit to show:
1. Increase in Assets 1. Decrease in Assets
2. Decrease in Liabilities 2. Increase in Liabilities
3. Decrease in owner's equity 3. Increase in Equity
- owner's withdrawal -Initial Investment
- Expenses -Additional Investment
-Revenue/ Income
Illustrative Problem
1-Aug May Daya is a masters’ degree holder in business administration. She worked for ten
years in the corporate world holding different managerial positions. Finally, May decide
to quit her job and establish a consultancy firm. She invests P800,000 in this initial
endeavor.
Cash 800,000.00
Daya, Capital 800,000.00
2-Aug May Daya issued a promissory note for a P500,000 loan payable after one year.
Cash 500,000.00
Notes Payable 500,000.00
3-Aug Acquired office furniture to be used for the office P150,000 cash
Furniture and Fixtures 150,000.00
Cash 150,000.00
5-Aug Acquired office equipment from Eastern Marketing P50,000 paying P10,000 and the
balance at the end of the month.
Office Equipment 50,000.00
Cash 10,000.00
Note Payable 40,000.00
7-Aug Paid Agno Insurance Co. P9,000 for one year insurance premium.
Prepaid Insurance 9,000.00
Cash 9,000.00
8-Aug Rented office space and paid three months rent in advance, P45,000.
Prepaid Rent 45,000.00
Cash 45,000.00
9-Aug The P7,000 office supplies ordered from Ace Supplies were delivered on account.
Office Supplies 7,000.00
Accounts Payable 7,000.00
10-Aug Consultation services rendered on account to MaCuenta Company, P100,000.
Accounts Receivable 100,000.00
Consultancy Fees 100,000.00
11-Aug Paid Ace Supplies P5,000 of the amount owed.
Accounts payable 5,000.00
Cash 5,000.00
12-Aug Received P50,000 from MaCuenta Company as partial payment.
Cash 50,000.00
Accounts Receivable 50,000.00
14-Aug Received P60,000 cash for six-month consultation services to Nick Co. to start next
month.
Cash 60,000.00
Unearned Consultancy Fee 60,000.00
18-Aug May Daya withdrew P18,000 for personal use.
Daya, Drawing 18,000.00
Cash 18,000.00
20-Aug Received cash from Ms Sue Gapa P30,000 for consultation services rendered.
Cash 10,000.00
Consultancy Fees 10,000.00
23-Aug Paid Assistant's Salary for the month, P8,000.
Salaries Expense 8,000.00
Cash 8,000.00
25-Aug Paid Electric bill for the month, P5,000
Utilities Expense 5,000.00
Cash 5,000.00
30-Aug Received bill from Maynilad, P450.
Utilities Expense 450.00
Utilities Payable 450.00
LET’S JOURNALIZE
2017
June 1 Alibaba deposited P600,000 in the account of the company. He also invested a
furniture valued at P50,000
3 Bought P5,000 supplies from National Book Store on account.
5 Tutorial Services rendered to Ms. Ta Liino on account P15,000
7 Tutorial Services rendered to various clients for cash P180,000
15 Paid account with National Book Store
18 Collected P5,000 from Ms. Ta Lino
20 Received Water bill, P400
28 Paid electricity for the month, P4,480
30 Paid water bill
THE T-ACCOUNT
An ‘account’ is a form of record that summarizes the increases or decreases of any specific accounting
value. The simplest form of account is the T-account because the accounting equation is represented by
the capital letter T. It is an informal tool used to analyze the effect of a transaction in the assets,
liabilities, owner’s equity, revenue, and expenses.
Elements
a. Account title
b. Debit
c. Credit
Account Title
Debit Credit
1. increase in asset 1. decrease in asset
2. decrease in liability 2. increase in liability
3. decrease in equity 3. increase in equity
Construct a T-account using the following transactions and prepare T-balance:
1-Aug May Daya is a masters’ degree holder in business administration. She worked for ten
years in the corporate world holding different managerial positions. Finally, May decide
to quit her job and establish a consultancy firm. She invests P800,000 in this initial
endeavor.
2-Aug May Daya issued a promissory note for a P500,000 loan payable after one year.
3-Aug Acquired office furniture to be used for the office P150,000 cash
5-Aug Acquired office equipment from Eastern Marketing P50,000 paying P10,000 and the
balance at the end of the month.
7-Aug Paid Agno Insurance Co. P9,000 for one year insurance premium.
8-Aug Rented office space and paid three months rent in advance, P45,000.
9-Aug The P7,000 office supplies ordered from Ace Supplies were delivered on account.
10-Aug Consultation services rendered on account to MaCuenta Company, P100,000.
11-Aug Paid Ace Supplies P5,000 of the amount owed.
12-Aug Received P50,000 from MaCuenta Company as partial payment.
14-Aug Received P60,000 cash for six-month consultation services to Nick Co. to start next
month.
18-Aug May Daya withdrew P18,000 for personal use.
20-Aug Received cash from Ms Sue Gapa P30,000 for consultation services rendered.
23-Aug Paid Assistant's Salary for the month, P8,000.
25-Aug Paid Electric bill for the month, P5,000
30-Aug Received bill from Maynilad, P450.
