MODULE THREE

The Recording Phase

At the end of this module, the student is expected to:

1. Describe and explain the importance and role of chart of accounts and the different books of
accounts.
2. Analyze the usual transactions of a service business and prepare corresponding journal entries.
3. Post journal entries to ledgers and summarize them to produce running or ending balances; and
4. Prepare a trial balance out of complete or incomplete ledgers.

Introduction

In the preceding modules, we discussed the nature of business transactions and the manner in
which they are analyzed and classified through the concept known as the accounting
equation. The primary emphasis was on the “why” rather than the “how” of accounting
operations; we aimed at an understanding of the reason for making the entry in a particular way.
We showed the effects of transactions by preparing an analysis using T-accounts. However, the
items made in these analyses are incomplete; in order to properly record a particular
transaction, a journal entry must be prepared in the process known as journalizing. Once a
journal entry had been completed, its various effects in the accounts are reflected in the ledgers
– more formal versions of the T-accounts – in another process known as posting. After that, a
trial balance is usually prepared. This chapter will focus on a step-by-step approach on these
two processes, which amongst all the steps in the accounting cycle, is the most common and
repetitive in nature.

Chart of Accounts

As you have gone through the process of analyzing business transactions, you might have
noticed that certain accounts regularly pop out, such as “Cash” or “Accounts Receivable”.
Though generally universal in nature, a certain business entity may have slightly differing
accounts used in their transactions. These differences are caused by a number of factors, which
includes the type of the business, its size and complexity and sometimes convenience. Due to
this, it is rather desirable for an entity to establish a systematic method of identifying and
locating each account in its records. This is where the chart of accounts comes into the picture.

The chart of accounts, sometimes called the code of accounts, is a listing of the accounts by
title and numerical description. In certain large companies, the chart of accounts may run to
hundreds of items. Still, disregarding its number, most accounts listed in the chart can be
identified through an account code and account title.

As an example, we have the chart of accounts of Clean-As-You-Go Laundry Shop, which will be
used in the majority of this chapter’s illustrations:

Code Title Code Title

101 Cash 301 L. Vendera, Capital
102 Accounts Receivable 302 L. Vendera, Drawings
103 Laundry and Soap Supplies 401 Service Revenue
104 Prepaid Rent 501 Salaries Expense
105 Furniture and Fixtures 502 Supplies Expense
106 Washing Equipment 503 Rent Expense
201 Accounts Payable 504 Utilities Expense
202 Notes Payable 505 Depreciation Expense
203 Salaries Payable 506 Interest Expense
204 Interest Payable 601 Income Summary
205 Unearned Service Revenue 602 Accumulated Depreciation

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Have you noticed a pattern in the coding of the company’s chart of accounts? As seen above,
Assets start with 1, Liabilities with 2, Capital and Drawing accounts with 3, Income with 4 and
finally 5-accounts are Expenses. Furthermore, accounts that start with 6 are reserved for special
accounts, which will only be used in certain transactions. In this case, the account Income
Summary is utilized on the closing transactions at year-end. Closing entries will be discussed in
Chapter 5, so ignore it for the time being.

Just like in our example, blocks of numbers are generally assigned to various groups of
accounts, such as assets and liabilities in this case. In designing a numbering structure for the
accounts, it is important to provide adequate flexibility to permit expansion without having to
revise the basic system. Of course, there are various other systems of coding, which is highly
dependent on the needs and desires of the company.

The chart of accounts serves as a guide to the accountant, in order to properly prepare journal
entries. Each journal entry made by the company should include the correct account title as
prescribed by the chart. The code numbers also serve a purpose in the posting process, which
will be discussed in a later part of the chapter.

The Journalizing Process

With the chart of accounts as a guide and starting point, we are ready to start the journalizing
process. Journalizing, simply put, is the process of writing down journal entries in the record
known as a journal. The journal - sometimes referred to as “the book of original entry” or the
“day book” - is a chronological listing of all business transactions that occurred. These
transactions are usually evidenced by various source documents, such as a purchase request
or sales receipts. The presence of these documents tells us that a certain event happened and
as a result, led to changes in the accounting equation. These changes should be reflected in the
journal entry, which consists of both debits and credits.

A simple two-column journal would look like the following:

General Journal
Date Description PR Debit Credit
2017
Jan. 1 Cash P 100,000.00
L. Vendera, Capital P 100,000.00
Initial capital investment.

Let us take a closer look in the different columns of the journal above, using the numbered
connotations as a guide.

(1) Date Column. The year, month, and day of the first entry are written in the date column. The
year and month do not have to be repeated for the additional entries until a new month occurs
or a new page is needed.

(2) Description Column. The account title to be debited is entered on the first line, next to the
date column. The name of the account to be credited is entered on the line below and indented.
An explanation is recorded after the credited account, also indented further to the right.

(3) P.R. (Posting Reference) Column. Nothing is entered in this column until the particular entry
is posted, that is, until the amounts are transferred to the related ledger accounts. The posting
process will be described in the next section.

(4) Debit Money Column. The debit amount for each account is entered in this column.
Generally, there is only one item, but there could be two or more separate items.

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(5) Credit Money Column. The credit amount for each account is entered in this column. Here
again, there is generally only one account, but there could be two or more accounts involved
with different amounts.

The journal shown above is also known as a general journal. True to its name, most “general”
or common transactions are recorded in this journal. There also exist several special journals,
which are utilized for specific transactions that occur too regularly and too similarly that only a
few accounts are affected. These special journals are much more common for merchandising
concerns. For a service entity such as Clean-As-You-Go Laundry Shop, a general journal would
suffice.

The first entry recorded for a business in its entire existence is called the opening entry. The
opening entry usually consists of the owner’s initial capital investment in the company, normally
in terms of money or a combination of money and different assets such as supplies and
equipment. For this illustration’s purpose, we shall assume that Miss Love Vendera, proprietress
of Clean-As-You-Go Laundry Shop invested P100,000.00 worth of cash on her business.

Continuing on, let us assume further that Miss Vendera decides to purchase the necessary
equipment, furniture and supplies she needs in order for her business to operate. Her
transactions are listed as follows:

Jan. 8 Purchased detergents, fabric conditioners and other supplies in the amount of P1,000.00.

Jan. 12 Purchased a desk, several chairs and a table for P15,000.00. Miss Vendera purchased
these fixtures in an installment basis, promising to pay P5,000.00 each month, starting on
the 31st.

Jan. 15 Purchased five new washing machines, each worth P10,000.00. Miss Vendera paid
P20,000.00 and promised to pay the rest through a promissory note with a 2% interest
paid every 15th of the month. The note is due on April 15, 2017.

By using transaction analysis, we can dissect each event above into various debits and credits.
Using the company’s chart of accounts, we can easily pick which ones we should use to reflect
the necessary effects in the accounting equation. After journalizing these transactions, the
general journal would look like this:

General Journal
Date Description PR Debit Credit
2017
Jan. 1 Cash P 100,000.00
L. Vendera, Capital P 100,000.00
Initial capital investment.

8 Laundry and Soap Supplies 1,000.00

Cash 1,000.00
Purchased laundry supplies.

12 Furniture and Fixtures 15,000.00

Accounts Payable 15,000.00
Purchased several furniture on account.

15 Washing Equipment 50,000.00

Cash 20,000.00
Notes Payable 30,000.00
Purchased washing machines, paying cash and
signing a 2% interest-bearing note.

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Several things could be noticed in the proceeding journal entries. First, the month in the Date
Column need not be repeated as long the first line contained it. The same could be done in the
peso signs in the Debit and Credit Money columns. Finally, there are two credits in the January
15 entry, in contrast to the other entries. Such a journal entry is known as a compound journal
entry. Compound journal entries can have one debit and two credits, two debits and one credit
or several debits and credits at once. A simple journal entry has only one on each side.

A new account Notes Payable is used in the illustration. It is a Liability account similar to
Accounts Payable, but unlike it, the Notes Payable account is reserved for debts written in
promissory notes. A promissory note is a promise or obligation to pay made in writing and
unlike other debts, is more formal and legally binding. Promissory notes also accrue interest,
which is a payable amount in addition to the principal, usually based on a percentage per month
or per year. In Miss Vendera’s case, she has a note for P30,000.00, which has monthly two
percent interest charge. It means that aside from paying P30,000.00 by April 15 – which is the
due date – she also has to pay P30,000 x 2% or P600 per month, starting on February 15. We
should probably take note of the interest payment on February 15, because aside from needing
a journal entry, Miss Vendera should also be reminded to pay P600 on that date.

Continuing on, with her shiny new equipment and adequate amount of supplies, Miss Vendera
is ready to start her venture. She gets two new customers on the next few days, each paying
through a different method.

Jan. 16 A customer, Mr. Hugh Gao, brought his dirty clothes for washing. He paid P500.00 for the
service.

Jan. 18 Another customer, Miss Dawn Nee carried her entire wardrobe for cleaning, since she
saw a dead cockroach inside it. It cost her P2,000.00 and will be taking three days to
finish. She decided to pay her dues when the service is done and not before.

Let’s analyze the above events. Mr. Gao’s transaction is fairly straightforward and would need a
debit to Cash and credit to Service Revenue. However, Miss Nee had not paid the shop, even
though the company had already taken her clothes for cleaning. As such, we can record a
receivable and a corresponding income from this transaction.

The next part of the general journal will look like this:

General Journal
Date Description PR Debit Credit
2017
Jan. 1 Cash P 100,000.00
L. Vendera, Capital P 100,000.00
Initial capital investment.

15 Washing Equipment 50,000.00

Cash 20,000.00
Notes Payable 30,000.00
Purchased washing machines, paying cash and
signing a 2% interest-bearing note.

16 Cash 500.00
Services Revenue 500.00
Received payment from a laundry job for Mr.
Gao

18 Accounts Receivable 2,000.00

Service Revenue 2,000.00
Accepted a laundry job for Miss Nee.

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Further transactions for January 2017 are listed as follows:

Jan. 19 Five more customers used the company’s service. Total cash received amounted to
P3,000.00

Jan. 21 Miss Nee arrived to claim her laundry and pay the company.

Jan. 24 Monthly rent for the space used by the company was paid; the amount was P3,000.00.

Jan. 26 A total P8,500.00 worth of services was worked by the shop. Only P2,000.00 was left
unpaid.

Jan. 27 Miss Love Vendera withdrew P500.00 cash from the company for personal use.

Jan. 29 Received the bill for the company’s electricity usage for month. The bill was for P1,500
and was immediately paid.

Jan. 30 Paid salaries for the shop’s only employee, totaling P4,000.00

Jan. 31 Paid the monthly installment for the furniture purchased on January 12.

As of now, the first page of the general journal would be looking quite full. Henceforth, we will be
using the next page to record the transactions above. Certain points should be taken into
consideration when making a new page for the general journal: column names should be written
once again and the same could also be said for the year and the month on the Date Columns
and the peso signs on the Debit and Credit Money Columns. Also, a journal entry should not be
divided between pages; in other words, all the debits, credits and the explanation should be
written on the same page.

General Journal
Date Description PR Debit Credit
2017
Jan. 19 Cash P 3,000.00
Service Revenue P 3,000.00
Received payment for laundry services.

21 Cash 2,000.00
Accounts Receivable 2,000.00
Received payment from Miss Nee.

24 Rent Expense 3,000.00

Cash 3,000.00
Paid rent for the month.

26 Cash 6,500.00
Accounts Receivable 2,000.00
Service Revenue 8,500.00
Recorded collected and uncollected revenue.

27 L. Vendera, Drawings 500.00

Cash 500.00
Owner withdrew cash for personal use.

29 Utilities Expense 1,500.00

Cash 1,500.00
Paid electricity bill for the month.

30 Salaries Expense 4,000.00

Cash 4,000.00
Paid monthly salaries for employee.

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 31 Accounts Payable 5,000.00
Cash 5,000.00
Paid monthly installment for the purchased
furniture from January 12.

Most of the journal entries are self-explanatory, as they were more or less discussed in the
previous chapters. Most of these entries highlight payment of expenses, which is a naturally
occurring event in any company.

The Posting Process

The next step in the accounting cycle is termed posting. Posting is the process of transferring
information from the journal to the ledger for the purpose of summarizing. The ledger is known
as the “book of final entry”, as this is where all the transactions of an account are recorded and
then summarized. The ledger shares a resemblance to the T-account discussed in the previous
chapter and it more or less serves the same purpose.

A ledger would look like the following:

101 – Cash
(1)
Debit Credit
(2) (3)
Date Description PR Amount Date Description PR Amount
(4) (5) (6) (7) (4) (5) (6) (7)
Jan. 1 Initial capital investment GJ1 P100,000.00

Once more, let us peruse the details of the ledger using the numbered connotations.

(1) Account Code and Title. Each ledger is prepared for each account and therefore should be
properly labeled.

(2) Debit Column. Transactions that debit the account shall be filled in on this column.

(3) Credit Column. Transactions that credit the account shall be filled in on this column.

(4) Date Column. Two separate columns for the date shall be made for both the debit and credit
columns. Rules abided by in the journal are also followed in the ledger.

(5) Description Column. Instead of debits or credits, this column will contain the explanation on
why the account was debited or credited. Two separate columns are made for both the debit
and credit columns.

(6) P.R. (Posting Reference) Column. The page of the particular journal entry which was posted
should be entered in this column. In the example above, GJ1 is General Journal 1, which meant
that the journal entry posted can be found in the first page of the general journal. In the general
journal’s P.R. Column, the account code will be written after the posting is finished. This will be
tackled in more detail later.

(7) Amount Column. The amount debited or credited shall be written here. Similar to the rest, a
column is dedicated to the debit and credit columns each.

The entry written on the first line of Cash ledger was the opening entry made in the general
journal. Since Cash was debited for P100,000.00, we post the same item in the debit column of
the ledger. We also entered the corresponding date and explanation associated with the entry.

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The P.R. column will have the denotation GJ1, which as discussed above, meant that the entry
can be found in the first page of general journal. This is a useful tool that allows the accountant
to cross-reference the details found on the ledger with journal and vice versa. After posting, the
journal’s P.R. column will need to be filled in as well.

General Journal
Date Description PR Debit Credit
2017
Jan. 1 Cash 101 P 100,000.00
L. Vendera, Capital P 100,000.00
Initial capital investment.

8 Laundry and Soap Supplies 1,000.00

Cash 1,000.00
Purchased laundry supplies.

As encircled, the number “101” is entered in the debit Cash line, signifying that the amount of
P100,000.00 is posted on the Cash ledger. Actually, “101” is the code of the Cash account,
telling us that the item was correctly posted in the correct ledger.

To summarize, the P.R. column of ledger will contain the page number of the journal the entry is
found (e.g. GJ1 or GJ2 for the second page) while that of the journal will have the account code
of the ledger it was entered in (e.g. 101 or 102 for Accounts Receivable). Make sure to fill in the
P.R. columns last, as a sign that the posting process had been completed.

Moving on, we have to finish posting the opening entry for Clean-As-You-Go Laundry Shop.

301 – L. Vendera, Capital

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan. 1 Initial capital investment GJ1 P100,00.00

General Journal
Date Description PR Debit Credit
2017
Jan. 1 Cash 101 P 100,000.00
L. Vendera, Capital 301 P 100,000.00
Initial capital investment.

8 Laundry and Soap Supplies 1,000.00

Cash 1,000.00
Purchased laundry supplies.

As seen in the parts of the general journal and the L. Vendera, Capital ledger, the credit part of
the opening entry had been properly posted. Take note that the P.R. Column of the General
Journal contained “301”, the account code of the L. Vendera, Capital account.

Using the general journal we prepared in the previous section, post each entry in their
respective ledgers. Flip to the next pages to see the completed general journal and ledgers for
the entire month of January 2017 of Clean-As-You-Go Laundry Shop.

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 General Journal
Date Description PR Debit Credit
2017
Jan. 1 Cash 101 P 100,000.00
L. Vendera, Capital 301 P 100,000.00
Initial capital investment.

8 Laundry and Soap Supplies 103 1,000.00

Cash 101 1,000.00
Purchased laundry supplies.

12 Furniture and Fixtures 105 15,000.00

Accounts Payable 201 15,000.00
Purchased several furniture on account.

15 Washing Equipment 106 50,000.00

Cash 101 20,000.00
Notes Payable 202 30,000.00
Purchased washing machines, paying cash and
signing a 2% interest-bearing note.

16 Cash 101 500.00

Services Revenue 401 500.00
Received payment from a laundry job for Mr.
Gao

18 Accounts Receivable 102 2,000.00

Service Revenue 401 2,000.00
Accepted a laundry job for Miss Nee.

Page 1

General Journal
Date Description PR Debit Credit
2017
Jan. 19 Cash 101 P 3,000.00
Service Revenue 401 P 3,000.00
Received payment for laundry services.

21 Cash 101 2,000.00

Accounts Receivable 102 2,000.00
Received payment from Miss Nee.

24 Rent Expense 503 3,000.00

Cash 101 3,000.00
Paid rent for the month.

26 Cash 101 6,500.00

Accounts Receivable 102 2,000.00
Service Revenue 401 8,500.00
Recorded collected and uncollected revenue.

27 L. Vendera, Drawings 302 500.00

Cash 101 500.00
Owner withdrew cash for personal use.

29 Utilities Expense 504 1,500.00

Cash 101 1,500.00
Paid electricity bill for the month.

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 30 Salaries Expense 501 4,000.00
Cash 101 4,000.00
Paid monthly salaries for employee.

31 Accounts Payable 201 5,000.00

Cash 101 5,000.00
Paid monthly installment for the purchased
furniture from January 12.

Page 2

101 – Cash
Debit Credit
Date Description PR Amount Date Description PR Amount
Jan. 1 Initial capital investment GJ1 P100,000.00 Jan. 8 Purchased laundry supplies. GJ1 P 1,000.00
16 Received payment from a 15 Purchased washing machines,
laundry job for Mr. Gao GJ1 500.00 paying cash and signing a 2%
19 Received payment for laun- interest-bearing note. GJ1 20,000.00
dry services. GJ2 3,000.00 24 Paid rent for the month. GJ2 3,000.00
21 Received payment from 27 Owner withdrew cash for
Miss Nee. GJ2 2,000.00 personal use. GJ2 500.00
26 Recorded collected and 29 Paid electricity bill for the
uncollected revenue. GJ2 6,500.00 month. GJ2 1,500.00
30 Paid monthly salaries for
employee. GJ2 4,000.00
31 Paid monthly installment for
the purchased furniture from
January 12. GJ2 5,000.00

102 – Accounts Receivable

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.18 Accepted a laundry job for Jan.21 Received payment from
Miss Nee. GJ1 P 2,000.00 Miss Nee. GJ2 P 2,000.00
26 Recorded collected and
uncollected revenue. GJ2 2,000.00

103 – Laundry and Soap Supplies

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan. 8 Purchased laundry supplies. GJ1 P 1,000.00

105 – Furniture and Fixtures

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.12 Purchased several furniture
on account. GJ1 P15,000.00

106 – Washing Equipment

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.15 Purchased washing machines
paying cash and signing a 2%
interest-bearing note. GJ1 P50,000.00

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 201 – Accounts Payable
Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.31 Paid monthly installment for Jan.12 Purchased several furniture
the purchased furniture from on account. GJ1 P 15,000.00
January 12. GJ2 P 5,000.00

202 – Notes Payable

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.15 Purchased washing machines,
paying cash and signing a 2%
interest-bearing note. GJ1 P 30,000.00

301 – L. Vendera, Capital

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan. 1 Initial capital investment GJ1 P100,000.00

302 – L. Vendera, Drawings

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.27 Owner withdrew cash for
personal use. GJ2 P 500.00

401 – Service Revenue

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.16 Received payment from a
laundry job for Mr. Gao GJ1 P 500.00
18 Accepted a laundry job for
Miss Nee. GJ1 2,000.00
19 Received payment for
laundry services. GJ1 3,000.00
26 Recorded collected and
uncollected revenue. GJ2 8,500.00

501 – Salaries Expense

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.30 Paid monthly salaries for
employee. GJ2 P 4,000.00

503 – Rent Expense

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.24 Paid rent for the month. GJ2 P 3,000.00

504 – Utilities Expense

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.29 Paid electricity bill for the
month. GJ2 P 1,500.00

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Just like the T-account, the ledger can be used to compute the balance of the specific account.
The ledger more or less summarizes all the transactions affecting the account and presents the
debit and credit totals.

As an example, we shall summarize the Cash account:

101 – Cash
Debit Credit
Date Description PR Amount Date Description PR Amount
Jan. 1 Initial capital investment GJ1 P100,000.00 Jan. 8 Purchased laundry supplies. GJ1 P 1,000.00
16 Received payment from a 15 Purchased washing machines,
laundry job for Mr. Gao GJ1 500.00 paying cash and signing a 2%
19 Received payment for laun- interest-bearing note. GJ1 20,000.00
dry services. GJ2 3,000.00 24 Paid rent for the month. GJ2 3,000.00
21 Received payment from 27 Owner withdrew cash for
Miss Nee. GJ2 2,000.00 personal use. GJ2 500.00
26 Recorded collected and 29 Paid electricity bill for the
uncollected revenue. GJ2 6,500.00 month. GJ2 1,500.00
30 Paid monthly salaries for
employee. GJ2 4,000.00
31 Paid monthly installment for
the purchased furniture from
January 12. GJ2 5,000.00
Total P112,000.00 Total P 35,000.00

The Amount Columns are totaled for both the Debit and Credit partitions. Basing from the totals,
one can say that the Cash account has a debit balance, since its total debits are greater than its
total credits.

101 – Cash
Debit Credit
Date Description PR Amount Date Description PR Amount
Jan. 1 Initial capital investment GJ1 P100,000.00 Jan. 8 Purchased laundry supplies. GJ1 P 1,000.00
16 Received payment from a 15 Purchased washing machines,
laundry job for Mr. Gao GJ1 500.00 paying cash and signing a 2%
19 Received payment for laun- interest-bearing note. GJ1 20,000.00
dry services. GJ2 3,000.00 24 Paid rent for the month. GJ2 3,000.00
21 Received payment from 27 Owner withdrew cash for
Miss Nee. GJ2 2,000.00 personal use. GJ2 500.00
26 Recorded collected and 29 Paid electricity bill for the
uncollected revenue. GJ2 6,500.00 month. GJ2 1,500.00
30 Paid monthly salaries for
employee. GJ2 4,000.00
31 Paid monthly installment for
the purchased furniture from
January 12. GJ2 5,000.00
Total P112,000.00 Total P 35,000.00

Balance P 77,000.00

Deducting the credit total from the debit total, we arrive at a debit balance of P77,000.00. The
amount is double-ruled – or two lines beneath the number – as a denotation that it’s the final
amount in the entire record.

The rest of the accounts will also be summarized. Take note that certain ledgers in the Chart of
Accounts have no transactions, making them “closed accounts”. Of course, these ledgers need
not be summarized, unless further transactions “open” them. As an example, the Prepaid Rent
ledger is not required to be summarized and remains at zero balance.

The next pages will present the completed ledgers, aside from the Cash account presented
above.

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 102 – Accounts Receivable
Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.18 Accepted a laundry job for Jan.21 Received payment from
Miss Nee. GJ1 P 2,000.00 Miss Nee. GJ2 P 2,000.00
26 Recorded collected and
uncollected revenue. GJ2 2,000.00
Total P 4,000.00 Total P 2,000.00

Balance P 2,000.00

103 – Laundry and Soap Supplies

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan. 8 Purchased laundry supplies. GJ1 P 1,000.00

105 – Furniture and Fixtures

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.12 Purchased several furniture
on account. GJ1 P15,000.00

106 – Washing Equipment

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.15 Purchased washing machines
paying cash and signing a 2%
interest-bearing note. GJ1 P50,000.00

201 – Accounts Payable

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.31 Paid monthly installment for Jan.12 Purchased several furniture
the purchased furniture from on account. GJ1 P 15,000.00
January 12. GJ2 P 5,000.00
Total P 5,000.00 Total P 15,000.00

Balance P 10,000.00

202 – Notes Payable

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.15 Purchased washing machines,
paying cash and signing a 2%
interest-bearing note. GJ1 P 30,000.00

301 – L. Vendera, Capital

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan. 1 Initial capital investment GJ1 P100,000.00

302 – L. Vendera, Drawings

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.27 Owner withdrew cash for
personal use. GJ2 P 500.00

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 401 – Service Revenue
Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.16 Received payment from a
laundry job for Mr. Gao GJ1 P 500.00
18 Accepted a laundry job for
Miss Nee. GJ1 2,000.00
19 Received payment for
laundry services. GJ1 3,000.00
26 Recorded collected and
uncollected revenue. GJ2 8,500.00
Total/Balance P 14,000.00

501 – Salaries Expense

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.30 Paid monthly salaries for
employee. GJ2 P 4,000.00

503 – Rent Expense

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.24 Paid rent for the month. GJ2 P 3,000.00

504 – Utilities Expense

Debit Credit
Date Description PR Amount Date Description PR Amount
Jan.29 Paid electricity bill for the
month. GJ2 P 1,500.00

Totals for ledgers with only one transaction need not be computed. As seen above, the
balances for these accounts can be easily identified.

Alternate Method of Posting: Three-Column Ledgers

A ledger can also be made using a three-column method. In this alternative, a “running balance”
of the account can be computed at any time, making it easier to keep track of the changes in the
account.

Once again, let’s use the transactions of the Cash account of Clean-As-You-Go Laundry Shop.
Posting the January 1 and 8 events will look like this:

501 – Cash
Date Description PR Debit Credit Balance
Jan. 1 Initial capital investment GJ1 P 100,000.00 P 100,000.00
8 Purchased laundry supplies. GJ1 P 1,000.00 99,000.00

The new “Balance” column contains the current amount of the account after posting all
preceding transactions. After the debit on January 1, the Cash account will have a balance of
P100,000.00. The credit on January 8 reduces this balance to P99,000.00, which is also shown
above.

The three-column ledger is practically useful when trying to manage accounts that have a
greater volume of transactions compared to another. Cash is one such account and so are
some Receivables and Payables. A disadvantage of this method is that it diverges from the
usual T-account style of putting debits and credits on the left and right respectively.

13
Using the alternate method, the Cash ledger can be completed as follows:

501 – Cash
Date Description PR Debit Credit Balance
Jan. 1 Initial capital investment GJ1 P 100,000.00 P 100,000.00
8 Purchased laundry supplies. GJ1 P 1,000.00 99,000.00
15 Purchased washing machines, paying cash and signing a
2% interest-bearing note. GJ1 20,000.00 79,000.00
16 Received payment from a laundry job for Mr. Gao. GJ1 500.00 79,500.00
19 Received payment for laundry services. GJ2 3,000.00 82,500.00
21 Received payment from Miss Nee. GJ2 2,000.00 84,500.00
24 Paid rent for the month. GJ2 3,000.00 81,500.00
26 Recorded collected and uncollected revenue. GJ2 6,500.00 88,000.00
27 Owner withdrew cash for personal use. GJ2 500.00 87,500.00
29 Paid electricity bill for the month. GJ2 1,500.00 86,000.00
30 Paid monthly salaries for employee. GJ2 4,000.00 82,000.00
31 Paid monthly installment for the purchased furniture
from January 12. GJ2 5,000.00 77,000.00

Preparing the Trial Balance

After posting all transactions in the ledgers, the next step in the accounting cycle is the
preparation of the trial balance. A trial balance is a list of all open accounts in the general
ledger and their balances. It is usually prepared to prove that all the debits equal the credits and
therefore the journal and ledgers are faithfully following the concept of the accounting equation.
A trial balance is prepared three times in the whole accounting cycle – the unadjusted trial
balance, the adjusted trial balance and the post-closing trial balance. The company can
produce more than these three instances, especially if monthly or quarterly data are needed. In
this section, we will learn how to prepare the trial balance, which is fundamentally the same no
matter where in the accounting cycle it is required.

Particularly, there are two types of trial balances, based on its formatting: the trial balance of
balances and the trial balance of totals. The two types have only one difference – the
amounts inputted in the debit and credit columns. Nonetheless, the trial balance starts with a
listing of all “open” accounts.

Clean-As-You-Go Laundry Shop

Trial Balance
January 31, 2017

Code Account Title Debit Credit

101 Cash
102 Accounts Receivable
103 Laundry and Soap Supplies
105 Furniture and Fixtures
106 Washing Equipment
201 Accounts Payable
202 Notes Payable
301 L. Vendera, Capital
302 L. Vendera, Drawings
401 Service Revenue
501 Salaries Expense
503 Rent Expense
504 Utilities Expense

As seen above, we listed all accounts that are “open” or those with existing transactions as of
the date of the trial balance. The accounts are listed chronologically based on their account
codes, or in their arrangement in the chart of accounts.

14
In a trial balance of balances, we write the balance of the account either in the debit or credit
column, depending on whether it is a debit or credit balance. The balances are of course taken
from the ledgers, which we already summarized.

Clean-As-You-Go Laundry Shop

Trial Balance
January 31, 2017

Code Account Title Debit Credit

101 Cash P 77,000.00
102 Accounts Receivable 2,000.00
103 Laundry and Soap Supplies 1,000.00
105 Furniture and Fixtures 15,000.00
106 Washing Equipment 50,000.00
201 Accounts Payable P 10,000.00
202 Notes Payable 30,000.00
301 L. Vendera, Capital 100,000.00
302 L. Vendera, Drawings 500.00
401 Service Revenue 14,000.00
501 Salaries Expense 4,000.00
503 Rent Expense 3,000.00
504 Utilities Expense 1,500.00
Totals P 154,000.00 P 154,000.00

As seen above, the balances of each account are listed and then totaled to prove that the debits
equal the credits. The totals are then double-ruled as a sign that the equality of the debits and
credits is maintained. If the totals are not “balanced”, then there might be an error in the
journalizing and/or posting process. Thus, the trial balance serves as a checkpoint in which the
accountant can verify if the entire accounting cycle was completed correctly. However, not all
errors can be exposed by the trial balance, meaning that the debits and credits can still be equal
in the case of the following errors:

1. Omission of a journal entry or the posting of the journal entry

2. Repetition of a journal entry or the posting of the journal entry
3. Journal entry with the wrong account debited and/or credited
4. Posting of a journal entry in the wrong ledger

The errors outlined above usually had to be manually checked, since the nature of the error lies
in placement or in the accounts themselves, and not the amounts, which can be easily verified
through the trial balance. Accounting errors and how to correct them are discussed in the next
chapters.

Next, we will prepare the trial balance of totals, where instead of showing the debit or credit
balance of the account, the total debits and credits on the ledger are inputted.

Clean-As-You-Go Laundry Shop

Trial Balance
January 31, 2017

Code Account Title Debit Credit

101 Cash P 112,000.00 P 35,000.00
102 Accounts Receivable 4,000.00 2,000.00
103 Laundry and Soap Supplies 1,000.00
105 Furniture and Fixtures 15,000.00
106 Washing Equipment 50,000.00
201 Accounts Payable 5,000.00 15,000.00
202 Notes Payable 30,000.00
301 L. Vendera, Capital 100,000.00
302 L. Vendera, Drawings 500.00

15
 401 Service Revenue 14,000.00
501 Salaries Expense 4,000.00
503 Rent Expense 3,000.00
504 Utilities Expense 1,500.00
Totals P 196,000.00 P 196,000.00

Instead of the specific balance on each account, the totals of the debit and credit columns in the
ledger are instead shown. The “balance” in the totals is still verified as well. However, unlike the
trial balance of balances, which show the exact balance of the account at a certain point in time,
the trial balance of totals need to be worked further to produce the same information. Due to
this, the trial balance of balances has greater use in the accounting process. After this section,
the term “trial balance” will denote a trial balance of balances and the rest of the examples in
this book will follow such formatting.

Chapter Summary

• The chart of accounts, sometimes called the code of accounts, is a listing of the accounts
by title and numerical description.
• Journalizing is the process of writing down journal entries in the record known as a journal.
The journal is referred to as the book of original entry and is merely a chronological listing
of transactions expressed in terms of debits and credits to particular accounts.
• Posting is the process of transferring amounts from a journal to the ledger. Transactions
recorded in a general journal must be posted individually. The ledger is referred to the book
of final entry and summarizes the total debits and total credits posted per account.
• A trial balance is a list of all open accounts in the general ledger and their balances. It also
proves the equality of total debits and total credits.
• There are two types of the trial balance: the trial balance of balances and the trial balance
of totals. The former lists the current debit or credit balance of the open accounts, while the
latter show the respective debit and credit totals of the accounts.

16
Exercise 1-1 – Multiple Choice Questions

Instructions: Select the correct or best answer.

1. A trial balance may prove that debits and credits are equal, but:
A. An amount could be entered in the wrong account.
B. Transaction could have been entered twice.
C. A transaction could have been omitted.
D. All of these.

2. An accounting record into which the essential facts and figures in connection with all
transactions are initially recorded is called the:
A. Ledger.
B. Account.
C. Trial balance.
D. Journal.

3. Which of the following statements regarding the ledger is untrue?

A. It is known as the book of final entry.
B. It is normally prepared after the trial balance is completed.
C. It shows the chronoligical listing of debit and credit transactions per account.
D. It can be used to trace transactions back to the journal.

4. The trial balance:

A. Have the accounts generally listed chronologically based on the chart of accounts.
B. Shows the current debit or credit balance of the accounts.
C. Should consist of all the accounts, whether they have transactions or not.
D. Is normally prepared three times in the accounting cycle.

5. Which of the following statements regarding the journal is incorrect?

A. It is known as the book of original entry.
B. It shows the current balance of an account at a point in time.
C. It is a chronological list of the transactions made by the company.
D. It has two money columns, one for debit and another for credit.

6. It is a financial organizational tool that provides a complete listing of every account in

an accounting system.
A. Chart of accounts
B. Journal
C. Ledger
D. Trial balance

7. It is the principal book or computer file for recording and totaling economic transactions
measured in terms of a monetary unit of account by account type, with debits and credits in
separate columns and a beginning monetary balance and ending monetary balance for each
account.
A. Journal
B. Ledger
C. Trial balance
D. Account

17
8. The Post Reference (PR) column:
A. Should be filled up in the strict order of journal then ledger.
B. Is useful in tracking data entered from the ledger to the journal and vice versa.
C. Can be omitted in the accounting process.
D. Always contains the Account Code of the specific account debited or credited.

9. The Trial Balance of Totals:

A. Shows the totals of the debits and credits of the account.
B. Is superior compared to the Trial Balance of Balances.
C. Presents the exact balance of the specific account as of a certain date.
D. Will always have the same balances as the Trial Balance of Balances.

10. Which of the following statements is true?

A. The compound entry can be broken down into two or more separate single entries.
B. A double-rule is a sign of complete and infallible accuracy in the records.
C. A company cannot change its chart of accounts under any circumstances.
D. The trial balance is required to be prepared at least five times in an accounting period.

18
Exercise 4-2 – Preparation of Journal Entries

Instructions: Journalize the below transactions using a two-column journal.

Roland O. Nerr recently opened a real estate brokerage office. During his first month of
operations, the following transactions occurred:
May 1 Roland O. Nerr transferred P75,000 cash for use in the business.
May 3 The office purchased P5,000 worth of office supplies.
May 5 The office paid advance rent worth two months for their office space. The rent is billed at
P10,000 per month.
May 10 The office purchased office equipment worth P30,000 on account. No downpayment was
necessary.
May 12 A client availed of the office’s services, paying P6,300.
May 15 Since business was slow, Mr. Nerr decided to advertise his business through a radio
program. The business paid P2,800 for the transaction.
May 19 Two customers visited the office and paid P11,900 after services were rendered.
May 20 Additional cash was invested to the business by Mr. Nerr in the amount of P10,000.
May 24 The office billed a client for services, P4,900, but did not receive any payment yet.
May 26 The office paid salary for Mr. Nerr’s secretary for the month, P5,250. The secretary is the
only employee in the office.
May 27 Electricity bill for the month amounted to P3,350.The bill was immediately settled.
May 28 The office was able to collect the amount due from the client from May 24.
May 31 Partial payment of P4,500 for the equipment purchased on account was made.

19
Exercise 4-3 – Preparation of Journal Entries

Instructions: Journalize the below transactions using a two-column journal.

Adam Go established a training school that offered weekly courses on different subjects. The
business started its operation on March and had the following transactions on that month:
March 1 Adam Go invested the following for his business: P65,700 cash and desks and chairs
worth P32,100.
March 2 The school purchased a brand-new computer set with printer, which was worth P45,000.
Downpayment of P6,450 was made while the rest was payable on account.
March 4 Licensing fees required for the school to operation was paid. The amount was P4,930.
March 6 Office supplies totaling P8,440 was purchased but not yet paid by the company.
March 9 Several students completed their courses today. P15,000 was collected by the school.
March 12 Mr. Go was in need of cash due to his car breaking down. He received P7,500 from the
school’s funds.
March 13 The account for the supplies purchased last March 6 was settled by the company.
March 14 Additional chairs were purchased by the school in exchange for P9,900 cash.
March 16 Another weekly course had been completed today. Out of the P17,910 total billing, only
P14,200 was collected by the school.
March 18 The company’s printer needed fixing. The company turned it over to the repair shop,
paying P2,820 for the service.
March 23 Cash of P12,740 was collected by the company. This amount includes the unpaid
balance from March 16.
March 25 The following bills were paid by the school: telephone – P3,670, internet – P4,260 and
electricity – P6,955.
March 27 Payroll for the teachers employed the school amounted to P13,650. The same amount
was paid.
March 30 The school collected P16,500 cash for the courses completed for the week.

20
Exercise 4-4 – Preparation of Journal Entries

Instructions: Journalize the below transactions using a two-column journal.

Eman Ayuhay, a well-sought fixer of all things broken, opened up a repair shop on November 1.
The business’ transactions are recorded below:
November 1 Eman Ayuhay invested cash of P40,000, equipment valued at P56,710 and spare part
supplies worth P14,265.
November 3 The business used a space owned by Mr. Ayuhay’s neighbor. The annual rental was
P120,000 and the company paid for the rent for the month.
November 5 The shop purchased additional equipment for use in the shop. The total sales price was
P89,990 but the company only paid P11,050. The business tendered a promissory note
for the balance, payable on May 5 the next year, with a one-percent interest to be paid
every 5th of the month.
November 8 A customer had his car repaired by the shop. He was billed P5,760, which was
immediately collected.
November 11 The business purchased on account additional spare sparts in the amount of P3,845.
November 15 Two airconditioning units and one washing machine was repaired by the business. Total
billing was P9,270, but P3,110 remained uncollected.
November 17 The business decided to advertise their business through the daily newspaper, paying
P8,000 in the process.
November 21 Since cash was running low, Mr. Ayuhay invested additional cash in the business, hoping
to raise his funds up to P50,000.
November 23 Half of the uncollected balance in November 15 was received.
November 24 A television, a refrigerator and a generator were successfully fixed by the shop. The
grateful customers paid P15,420 in full.
November 26 Wages for the employees was paid, amounting to P9,827.
November 29 The company paid for the spare parts purchased on account.
December 2 The electricity and water bills were received. The amount was P8,430, but the business
opted not to pay yet.
December 5 The shop paid for the interest on their promissory note.
December 6 A vaccuum cleaner and an oven were sent to the repair shop for maintenance. The
company collected P3,500, which was only one-third of the total value of the service
rendered.
December 9 The balance from the November 15 client was fully collected.
December 11 The shop paid for the rent this month and for January.
December 14 The electricity and water bills were paid by the company in full.
December 15 More clients went to the shop for repair services. The company billed a total of P10,739,
but only P4,376 was collected.

21
Exercise 4-5 – Understanding Journal Entries

Instructions: For each journal entry below, provide a brief explanation of the transaction that
might appear in the general journal.

(1) Equipment 12,000.00

Cash 4,000.00
Accounts Payable 8,000.00

(2) Notes Payable 8,500.00

Cash 8,500.00

(3) Office Supplies 3,450.00

Accounts Payable 3,450.00

(4) Cash 20,000.00

Furniture and Fixtures 11,950.00
D. Awner, Capital 31,950.00

(5) Cash 3,000.00

Note Receivable 4,250.00
Service Revenue 7,250.00

(6) D. Awner, Withdrawals 1,090.00

Office Supplies 1,090.00

(7) Advertising Expense 6,780.00

Accounts Payable 6,780.00

(8) Accounts Receivable 10,050.00

Cash 10,050.00

(9) Cash 17,200.00

Equipment 17,200.00

(10) Salaries Expense 4,520.00

Rent Expense 11,000.00
Utilities Expense 3,980.00
Cash 19,500.00

22
Exercise 4-6 – Understanding Journal Entries

Instructions: In the general journal presented below, fill in the missing spaces denoted by the
numbers.

General Journal
Date Description PR Debit Credit
2017
June 1 Cash P 15,000.00
Equipment (1)
T. Gulang, Capital P 49,000.00
Initial investment of the owner

7 (2) 2,000.00
Service Revenue 2,000.00
Recorded collection from client.

10 Rent Expense 5,500.00

(3) (4)
Paid the rent for the month.

13 Cash (5)
(6) 10,970.00
Service Revenue 28,400.00
Recorded collected and uncollected revenue.

17 (7) 3,500.00
Cash 3,500.00
Owner withdrew cash for personal use.

19 Cash (8)
Accounts Receivable (8)
Collected one-half of the uncollected revenue
from the June 13 transaction.

21 Salaries Expense 8,400.00

Cash 8,400.00
Paid monthly salaries for employees.

24 Equipment 14,526.00
(9) 14,526.00
Purchased equipment by way of a 2%-interest-
bearing note.

26 Office Supplies 2,350.00

Accounts Payable 2,350.00
Purchased office supplies on account.

27 Utilities Expense 4,957.00

Cash 4,957.00
Paid for the electricity bill.

30 Accounts Payable (10)

Cash (10)
Paid half of the supplies purchased on account.

23
Exercise 4-7 – Posting in the Ledger

Instructions: Using the general journal shown below, post the entries into two-column ledgers.
Don’t forget to fill up the PR column in the journal. Afterwards, summarize the ledger accounts
and determine the balances as of February 28. Use the following chart of accounts:

101 Cash 401 Service Revenue

102 Accounts Receivable 501 Salaries Expense
103 Office Supplies 502 Advertising Expense
104 Equipment 503 Rent Expense
201 Accounts Payable 504 Repairs Expense
301 P. Ratta, Capital 505 Utilities Expense

General Journal
Date Description PR Debit Credit
2017
Feb. 1 Cash P 95,000.00
Equipment 45,000.00
P. Ratta, Capital P 140,000.00
Initial capital investment.

4 Equipment 16,200.00
Accounts Payable 16,200.00
Purchased office equipment on account.

6 Cash 2,500.00
Service Revenue 2,500.00
Collected cash for services rendered to client.

8 Office Supplies 960.00

Cash 960.00
Purchased office supplies.

11 Advertising Expense 4,650.00

Accounts Payable 4,650.00
Availed of an advertisement on radio.

14 Cash 2,900.00
Accounts Receivable 4,560.00
Service Revenue 7,460.00
Rendered services to customers.

15 Accounts Payable 3,450.00

Cash 3,450.00
Partial payment of accounts.

18 Rent Expense 2,750.00

Cash 2,750.00
Paid for rent for the month.

19 Cash 1,800.00
Accounts Receivable 1,800.00
Collected payment from past customers.

22 Accounts Receivable 2,100.00

Service Revenue 2,100.00
Rendered service on account.

Page 1

24
 General Journal
Date Description PR Debit Credit
2017
Feb. 24 Repairs Expense P 1,385.00
Cash P 1,385.00
Had faulty equipment fixed by the repairman.

25 Office Supplies 3,600.00

Accounts Payable 3,600.00
Purchased additional supplies on account.

26 Salaries Expense 7,840.00

Cash 7,840.00
Paid wages of employees.

27 Utilities Expense 2,730.00

Cash 2,730.00
Paid the company’s bills for water and power.

28 Cash 6,800.00
P. Ratta, Capital 6,800.00
Additional investment by the owner.

Page 2

25
Exercise 4-8 – Posting in the Ledger

Instructions: Using the general journal shown below, post the entries and summarize the
accounts in:

(1) A two-column-type ledger; and

(2) A three-column-type ledger

The chart of accounts of the company is as follows:

Code Title Code Title

101 Cash on Hand 301 A. Migo, Capital
102 Accounts Receivable 302 A. Migo, Drawings
103 Notes Receivable 401 Service Revenue
104 Supplies 402 Interest Revenue
105 Equipment and Machinery 501 Salaries Expense
106 Furniture and Fixtures 502 Utilities Expense
201 Accounts Payable 503 Rent Expense
202 Notes Payable 504 Insurance Expense
505 Interest Expense

General Journal
Date Description PR Debit Credit
2017
Aug. 1 Cash P 55,000.00
Supplies 3,890.00
Equipment and Machinery 29,700.00
A. Migo, Capital P 88,590.00
Initial capital investment.

2 Rent Expense 8,000.00

Insurance Expense 6,050.00
Cash 14,050.00
Paid for rent and insurance in advance.

5 Furniture and Fixtures 27,350.00

Cash 5,000.00
Notes Payable 22,350.00
Purchased furniture through a 1%-interest note.

7 Cash 9,500.00
Accounts Receivable 13,460.00
Service Revenue 22,960.00
Rendered services to customers.

10 Supplies 4,640.00
Accounts Payable 4,640.00
Purchased office supplies on account.

12 Cash 8,250.00
Accounts Receivable 8,250.00
Collected from customers on account.

13 Notes Receivable 14,020.00

Service Revenue 14,020.00
Received a 2%-interest note from a client.

16 Accounts Payable 1,350.00

Cash 1,350.00
Partial payment of accounts.
Page 1

26
 General Journal
Date Description PR Debit Credit
2017
Aug. 18 A. Migo, Drawings P 4,500.00
Cash P 4,500.00
Owner withdrew cash for personal use.

21 Cash 7,550.00
Accounts Receivable 4,775.00
Service Revenue 12,325.00
Rendered services to customers.

23 Office Supplies 1,180.00

Cash 1,180.00
Purchased additional supplies.

24 Cash 6,920.00
Accounts Receivable 6,920.00
Collected from customers on account.

28 Utilities Expense 2,730.00

Cash 2,730.00
Paid the company’s electricity bill.

29 Salaries Expense 7,840.00

Cash 7,840.00
Paid the salaries of employees.

31 Accounts Payable 3,290.00

Cash 3,290.00
Full payment of amount due.
Page 2

General Journal
Date Description PR Debit Credit
2017
Sept. 1 Equipment and Machinery P 11,200.00
Accounts Payable P 11,200.00
Purchased additional machines on account.

5 Notes Payable 5,000.00

Interest Expense 223.50
Cash 5,223.50
Partial payment of note including interest.

9 Rent Expense 8,000.00

Cash 8,000.00
Paid for rent for the month.

13 Cash 1,980.40
Notes Receivable 1,700.00
Interest Revenue 280.40
Received partial payment from client’s note.

14 Cash 14,200.00
Accounts Receivable 750.00
Service Revenue 13,450.00
Collected from customers.

Page 3

27
Exercise 4-9 – Reconstructing Journal Entries from the Ledger

Instructions: From the data on the ledgers presented below, prepare the journal entries that
were recorded by the company before the posting process was finished.

101 – Cash
Debit Credit
Date Description PR Amount Date Description PR Amount
Apr. 1 Initial investment. GJ1 P35,000.00 Apr. 4 Purchased equipment by
7 Rendered services to clients. GJ1 6,490.00 issuing a 2%-interest note. GJ1 P 3,500.00
11 Collected from credit 14 Owner withdrew cash for
customers. GJ1 1,300.00 personal use. GJ2 2,500.00
13 Rendered services to clients. GJ2 2,950.00 16 Partial payment of accounts. GJ2 2,000.00
21 Rendered services to clients. GJ2 9,000.00 17 Paid rent for the month. GJ2 5,700.00
22 Collected from credit 25 Paid wages for the month. GJ2 9,425.00
customers. GJ2 5,830.00 29 Paid for this month’s electric
bill. GJ2 4,115.00

102 – Accounts Receivable

Debit Credit
Date Description PR Amount Date Description PR Amount
Apr. 7 Rendered services to clients. GJ1 P 3,575.00 Apr.11 Collected from credit
13 Rendered services to clients. GJ2 5,680.00 customers. GJ1 P 1,300.00
22 Collected from credit
customers. GJ2 5,830.00

103 – Office Supplies

Debit Credit
Date Description PR Amount Date Description PR Amount
Apr. 1 Initial investment. GJ1 P 5,400.00
5 Purchased supplies on
account. GJ1 3,750.00

104 – Equipment
Debit Credit
Date Description PR Amount Date Description PR Amount
Apr. 4 Purchased equipment by GJ1 P18,500.00
issuing a 2%-interest note.
8 Additional investment. GJ1 8,500.00

201 – Accounts Payable

Debit Credit
Date Description PR Amount Date Description PR Amount
16 Partial payment of accounts. GJ2 2,000.00 Apr. 5 Purchased supplies on GJ1 3,750.00
account.

202 – Notes Payable

Debit Credit
Date Description PR Amount Date Description PR Amount
Apr. 4 Purchased equipment by GJ1 P15,000.00
issuing a 2%-interest note.

301 – U. Lagway, Capital

Debit Credit
Date Description PR Amount Date Description PR Amount
Apr. 1 Initial investment. GJ1 P 40,400.00
8 Additional investment. GJ1 8,500.00

28
 302 – U. Lagway, Drawings
Debit Credit
Date Description PR Amount Date Description PR Amount
Apr.14 Owner withdrew cash for
personal use. GJ2 2,500.00

401 – Service Revenue

Debit Credit
Date Description PR Amount Date Description PR Amount
Apr. 7 Rendered services to clients. GJ1 P 10,065.00
13 Rendered services to clients. GJ2 8,630.00
21 Rendered services to clients. GJ2 9,000.00

501 – Wages Expense

Debit Credit
Date Description PR Amount Date Description PR Amount
Apr.25 Paid wages for the month. GJ2 9,425.00

502 – Rent Expense

Debit Credit
Date Description PR Amount Date Description PR Amount
Apr.17 Paid rent for the month. GJ2 5,700.00

503 – Utilities Expense

Debit Credit
Date Description PR Amount Date Description PR Amount
Apr.29 Paid for this month’s electric
bill. GJ2 4,115.00

29
Exercise 4-10 – Trial Balance Preparation

Instructions: Using the data from the ledgers extracted from the Auto-Pilot Driving School
shown below, prepare a:

(1) Trial balance of balances; and

(2) Trial balance of totals.

(3) 101 – Cash

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct. 1 Initial investment. GJ1 P68,000.00 Oct. 5 Purchased office supplies. GJ1 P 3,450.00
8 Completed driving lessons. GJ1 6,750.00 7 Paid for vehicle insurance. GJ1 8,920.00
12 Collected credit from clients. GJ2 3,479.00 14 Partial payment of accounts. GJ2 12,040.00
15 Completed driving lessons. GJ2 5,010.00 16 Paid for minor car repairs. GJ2 2,545.00
20 Collected credit from clients. GJ2 2,243.00 18 Paid for an advertisement. GJ2 7,725.00
22 Completed driving lessons. GJ3 11,355.00 21 Owner withdrew money. GJ3 4,800.00
31 Additional investment. GJ3 15,000.00 25 Partial payment of accounts. GJ3 4,596.00
26 Payment of salaries. GJ3 9,460.00
28 Payment of utility bills. GJ3 5,655.00

102 – Accounts Receivable

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct. 8 Completed driving lessons. GJ1 P 7,250.00 Oct.12 Collected credit from clients. GJ2 P 3,479.00
15 Completed driving lessons. GJ2 3,700.00 20 Collected credit from clients. GJ2 2,243.00
22 Completed driving lessons. GJ3 2,900.00

103 – Office Supplies

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct. 5 Purchased office supplies. GJ1 P 3,450.00

104 – Gasoline & Lubricant Supplies

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct. 1 Initial investment. GJ1 P 8,675.00
10 Purchased fuel on account. GJ1 3,595.00

105 – Property, Plant and Equipment

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct. 1 Initial investment. GJ1 P49,500.00
2 Purchased a new car through
a 1%-interest-bearing note. GJ1 63,400.00

106 – Furniture and Fixtures

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct. 4 Purchased a sofa and table
on account. GJ1 19,230.00

201 – Accounts Payable

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct.14 Partial payment of accounts. GJ2 P12,040.00 Oct. 4 Purchased a sofa and table
25 Partial payment of accounts. GJ3 4,596.00 on account. GJ1 19,230.00
10 Purchased fuel on account. GJ1 3,595.00

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 202 – Notes Payable
Debit Credit
Date Description PR Amount Date Description PR Amount
Oct. 2 Purchased a new car through
a 1%-interest-bearing note. GJ1 63,400.00

301 – K. Rider, Capital

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct. 1 Initial investment. GJ1 P126,175.00
31 Additional investment. GJ3 15,000.00

302 – K. Rider, Drawings

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct.21 Owner withdrew money. GJ3 P4,800.00

401 – Service Fees

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct. 8 Completed driving lessons. GJ1 P 14,000.00
15 Completed driving lessons. GJ2 8,710.00
22 Completed driving lessons. GJ3 14,255.00

501 – Salaries Expense

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct.26 Payment of salaries. GJ3 P 9,460.00

502 – Advertising Expense

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct.18 Paid for an advertisement. GJ2 P 7,725.00

503 – Insurance Expense

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct. 7 Paid for vehicle insurance. GJ1 P 8,920.00

504 – Repairs and Maintenance Expense

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct.16 Paid for minor car repairs. GJ2 P 2,545.00

505 – Utilities Expense

Debit Credit
Date Description PR Amount Date Description PR Amount
Oct.28 Payment of utility bills. GJ3 P 5,655.00

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Problem 4-11 – Journalizing to Trial Balance
Instructions: Prepare the journal entries, post them in the ledger and prepare a trial balance of
balances for the presented transactions of the company.
Miss Korina Antahan is a renowned producer of entertainment idols. She decided to establish
her own talent agency, the K. Antahan Idol Productions. She immediately scoured the whole
country for the next singing and dancing sensations and scouted them.
For the month of July, the agency’s first month, the following transactions occurred:
July 1 Korina Antahan invested P200,000 cash, furniture and fixtures worth P165,000, recording
and other equipment valued at P395,000 and a mini-van priced at P548,000.
July 2 The owner of building the company will use in its operations, Elise Sur, signed a lease
agreement with Miss Antahan. The contract states that the company will pay an annual
rent of P240,000. Three months’ worth of rent was immediately paid.
July 3 The agency ordered the following from the Note-Worthy Enterprises: office supplies
costing P5,950 and a new sofa worth P15,625. The two items were purchased on credit.
July 5 A talent of the agency, Miss Cara Okay, had a successful concert. Royalties worth
P55,000 was received by the company.
July 7 In search for new recruits, the company sent Miss Antahan to other cities. Her total plane
fare cost P15,600.
July 8 A singer affiliated with agency, Miss Kaye Pop, released a new single. Royalties were
estimated to be P126,750, but the agency only received half.
July 10 The agency’s mini-van broke down. Since Miss Antahan was using it at the time, she
used some of her personal cash to have it repaired. The bill was P4,780.
July 11 The company paid for the supplies in full.
July 14 Mr. Hans Sum, a fresh young idol recruited from the boondocks by Miss Antahan, had his
debut concert. Due to his ruggish good looks and husky voice, his event was a complete
success. The company happily collected the royalties valuing P95,400.
July 15 Today, the company’s payroll was paid. Total salaries for the stars and the staff
amounted to P89,450.
July 17 Mr. Sum was hired to do an underwear commercial ad. Royalties worth P39,750 was
billed, but not yet collected.
July 19 To invite more promising talents, the company was promoted through a television ad by
the TV Station Family Hearts. The agency paid P40,180 for this transaction.
July 20 The bill for Mr. Sum’s ad was settled and the agency collected the whole amount.
July 22 Miss Antahan was hospitalized for overwork. The company paid for her medical bill worth
P11,000.00.
July 24 Mr. Dan Seur, a new dancing idol, had his first show today. The response was overall
positive and the company received royalties amounting to P25,090.
July 25 The company paid for half of the price of the sofa purchased on account.
July 26 A brand-new car was purchased, for use by the agency’s talents. The cost was
P450,000, financed by an interest-bearing note with an annual rate of 10% and a
downpayment of P50,000.00
July 27 The agency paid their bills for utilities: power - P51,250, water - P8,760, telephone -
P6,700 and internet - P7,050.
July 29 Mr. Hans Sum was involved in a scandal with the sexy reporter Miss Weather Lang. The
company was forced to pay legal fees of P16,945 to attorneys to sue the gossip
magazine and its staff.
July 31 Another set of payroll was prepared. Talent and staff salaries this time amounted to
P95,650.

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K. Antahan Idol Productions uses the following chart of accounts:
A01 Cash I01 Royalty Revenues
A02 Royalties Receivable E01 Salaries Expense
A03 Supplies E02 Rent Expense
A04 Furniture & Fixtures E03 Utilities Expense
A05 Equipment E04 Advertising Expense
A06 Vehicles E05 Repairs Expense
L01 Accounts Payable E06 Legal Expense
L02 Notes Payable E07 Travel Expense
C01 K. Antahan, Capital
C02 K. Antahan, Drawings

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