Republic of the Philippines

Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA

LESSON EXEMPLAR
FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 1
Content Adjusting Entries for Sevice Business
Grade Level 11
Time Allotment 240 minutes
Content Standard The learners demonstrate an understanding of
completing the accounting cycle of a service
business.
Performance Standard The learners are be able to prepare adjusting
entries.
Learning Competencies/Objectives ( 60 Minutes)
Learning Competency: prepares adjusting entries
Objectives: By the end of this lesson, students will be able to:
(1) understand the concept and characteristics of adjusting entries; and (2) identify types of adjusting
entries.
Activity ( 20 minutes) Materials
Activity: Making Up a Scenario Powerpoint
Instructions: presentation
1. Divide the class into 5 groups. , Laptop
2. Assign each group with one of the accounting instances listed below:
Group 1. some expenses although expired are not included in the trial balance Manila
Group 2. some assets in the trial balance should be expired or used up Paper and
Group 3. some liabilities in the trial balance should be recognized as earned Marker
Group 4. some income reported in the trial balance are still unearned
Group 5. some expenses reported in the trial balance are stll unexpired
3. Each group needs to come up with at least one story or stories that describe the accounting
instance assigned to them and the scenario that caused it to happen. They should include
the following in their story:
● What happened to cause the accounting instance to occur?

● What impact does the accounting instance have on the financial statements?

● How could the accounting instance be corrected?

4. Students will be given 10 minutes to formulate ideas and prepare their output on
Manila paper.
5. Students will present their ideas to the class.

Example:
Accounting instance: some income although earned are not included in the trial balance
Scenario 1:
What happened to cause the accounting instance to occur?
STEM Construction Company, an engineering consultancy business has completed a
project for a client, but forgot to invoice them for the services rendered. The business
owner realizes this after preparing the trial balance.

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 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA

What impact does the accounting instance have on the financial statements?
The income presented in the financial statement is understated because of unrecorded
income from the completed project.
How could the accounting instance be corrected?
The income for the completed project needs to be recorded.

Scenario 2:
What happened to cause the accounting instance to occur?
Sunny’s Travels, a van rental company, showed an unearned income from the advance
payment from the customer which was received last month. The services were already
availed by the customer this month but were not recognized as income.
What impact does the accounting instance have on the financial statements?
The income presented in the financial statement is understated because of unrecognized
income from the services rendered.
How could the accounting instance be corrected?
The liability (unearned income) should decrease as the income for the rendered services
needs to be recognized.
Analysis ( 10 minutes)
After the activity, the students will be asked the following questions to better process the
new concept:

1. How do you find the activity? Was it easy or difficult? Why?

2. What are your realization while doing the activity? Does the activity provide you Powerpoint
with a wider insights on the importance of proper recognition and recording of presentation
accounting instances? , Laptop
3. Do you think the financial reports that will be produced will still be relevant when
the company fails to recognize accounting instances like this?
4. What accounting concepts and principles were linked in our activity?
*Accual Accounting Principle (Revenue Recognition/ Expense Recognition);
*Matching Type; *Time Period Principle
Abstraction ( 20 minutes)
Start the discussion by checking progress on learning the steps in the accounting
cycle:
1. Analyzing business transactions from source documents.
2. Jouranlizing the business transactions during the
accounting
3. Posting journal entries to the ledger
period
4. Preparing Trial Balance
NOW! 5. Journalizing and posting adjusting journal entries end the
Next 6. Prepare adjusted trial balance accounting
Less 7. Prepare Financial Statements period
ons 8. Journalizing and posting closing journal entries
9. Preparing post-closing trial balance
10. Journalizing and posting reversing journal entires start of the

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Telephone No.: (045) 435-27-28; Email Address: [email protected]
 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
next
accounting
period

STEP 5: JOURNALIZING AND POSTING ADJUSTING JOURNAL ENTRIES

Adjusting Journal Entries (AJE)

- are the entries made prior to the preparation of financial statement to update certain
accounts so that they reflect correct balances as of the designated time.

Businesses prepared adjusting entries in order to comply with the accrual basic
assumption (already discussed in previous module about accounting concepts and
principles) and to separate mix accounts that have components of assets and
expense, liability and income and other accounts that used estimates in recording
expense. Powerpoint
Presentation
Trigger question for students: , Laptop,
From the above definition of AJE, what are some key traits or characteristics of adjusting Chalk and
entries? Board

* Please note that students may identify some or all of the characteristics mentioned
below. If any characteristics are missed, the teacher will supply an explanation.

Characteristics of Adjusting Entries:

1. Each entry is recorded at the end of an accounting period
2. Each entry has at least one balance sheet account – real accounts (e.g. Asset or
liability) and at least one income statement account – nominal accounts (e.g.
Revenue or expense)
3. Each entry has no cash account in either the debit or the credit side.

Classifications of Adjusting Entries

1. Accrued revenues
Accruals
2. Accrued expenses
3. Prepaid expenses
Defferals
4. Deffered revenues
5. Bad Debts
Estimates
6. Depreciation

Trigger question for students:

The above classifications of adjusting entries were already discussed in previous lessons
on accounts. Can you share your thoughts on what you remember about each?

Expected answers from students:

1. Accrued Revenue - Revenue that has been earned but not yet received or invoiced.
2. Accrued expenses - Expenses that have been incurred but not yet paid.

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 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
3. Prepaid expenses - Expenses paid in advance that have not yet been used up.
4. Deffered revenues – Liability that represents the payment received by a company in
advance for goods or services that have not yet been delivered or performed.
5. Depreciation - The decline in value of long-term assets over time.
6. Bad Debts - An estimate of uncollectible accounts receivable.
Application ( 10 minutes)
10 points:
Provide 3-5 sentences explanation to this questions:
Why is adjusting entries necessary in accounting? What if the company failed to do it?

Rubric:
Powerpoint
Criteria Excellent Satisfactory Needs Inadequate
presentation
(5pts) (3-4pts) Improvement (0)
, Laptop
(1-2pts)
1. Clarity of
explanation

2. Relevance to
the question
Learning Competencies/Objectives ( 60 Minutes)
Learning Competency: prepares adjusting entries
Objectives: By the end of this lesson, students will be able to:
(2) understand the concept of the 6 basic adjusting entries; and (2) analyze, solve problem
and prepare adjusting entries.
Activity ( 10 minutes)
Identify whether the transaction would probably result to INCOME or EXPENSE:
(*Note: each transactions below are not related to each other)
_________ 1. Interest received on a bank account
_________ 2. Rent paid for office space
_________ 3. Fees earned for providing a service
_________ 4. Products sold but not yet paid for by customers
_________ 5. Taxes paid to government agencies
_________ 6. Gains from the sale of assets Powerpoint
_________ 7. Salaries earned by employees but not yet paid presentation
_________ 8. Delivered goods to the customers on account , Laptop
_________ 9. Interest paid for a bank loan
_________ 10. Completion of project to a customer who paid in advance

Answer:
1. Income 2. Expense 3. Income 4. Income 5. Expenses
6. Income 7. Expense 8. Income 9. Expense 10. Income

Analysis ( 5 minutes)
Powerpoint

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 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
1. How did you find the activity?
2. Did you correctly recognize all of the transactions?
3. Did you use a strategy to analyze whether the transaction is an income or an
presentation
expense?
, Laptop
4. Did you find your strategy effective?
5. After the activity and quick sharing of your experience and strategies for analyzing
transactions, do you feel more confident about this topic?

Abstraction ( 90 minutes)

Review the classifications of adjusting entries

1. Accrued revenues
A. Accruals
2. Accrued expenses
3. Prepaid expenses
B. Defferals
4. Deffered revenues
5. Depreciation
C. Estimates
6. Bad Debts

A. ADJUSTING ENTRIES FOR ACCRUALS

Accruals means to:

(a) recognize revenue earned without regard to when they are collected; or
(b) recognize expenses without regard to when they are paid by the business. Powerpoint
presentation
1. ACCRUED REVENUE , Laptop,
- It is the opposite of unearned revenue. Projector/
- Instead of receiving the services in advance, payment is received after the service. Printed
Fact Check: handouts
Adjusting Journal Entry: NO CASH entry for AJE
Accrued Revenue an Chalk and
Accrued Revenue (Accounts Receivable) xxx ASSET account (a balance Board
Revenue xxx sheet account)
Revenue is an Income
Statement Account

On October 31, 2020, ABM Services received a 6-month note from STEM Co. amounted
to P180,000 with 12% interest payable on maturity date. Record the adjusting entry as of
December 31, 2020.
NOTE: JOURNAL RECORD in the book of ABM SERVICES

AJE is always
dated at the end
of accounting
period

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Telephone No.: (045) 435-27-28; Email Address: [email protected]
 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
Computation:
I=PRT (where I is for interest, P for principal, R for rate and T for time)
Principal = P180,000; Rate – 12%; Time – 2 mos. (Nov. 1- Dec. 31) out of 12 mos.

P180,000 x 12% x 2/12 = P3,600

2. ACCRUED EXPENSES:
- These expenses are already incurred before the actual disbursement of cash.
- Liability will go up because of the credit to payable. Equity will go down because
an expense is recorded.

Fact Check:
Adjusting Journal Entry: NO CASH entry for AJE
Expenses is an Income
Expenses xxx Statement Account
Accrued Expenses Payable xxx
Accrued Expenses Payable
a LIABILITY account (a
balance sheet account)

On October 31, 2020, the STEM Co. issued a 6-month note as payment for the service
rendered by ABM Services. The note is amounted to P180,000 with 12% interest.

NOTE: JOURNAL RECORD in the book of STEM Co.

Computation:
I=PRT (where I is for interest, P for principal, R for rate and T for time)
Principal = P180,000; Rate – 12%; Time – 2 mos. (Nov. 1- Dec. 31) out of 12 mos.

P180,000 x 12% x 2/12 = P3,600

B. DEFFERALS
- are transactions that involve the advance payment OR receipt of cash for goods or
services that will be used or provided in the future.

Two Classifications:
*PREPAID EXPENSES - advanced payment paid by the business to the suppliers
* UNEARNED REVENUE - advanced payment received by the business from the
customers

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Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA

3. PREPAYMENTS (Prepaid Expenses)

-These expenses are paid even before they are incurred.
Two Methods of recording:
NOTE: JOURNAL RECORD in the book of HUMSS Cafe
Method (a) ASSET METHOD (b) EXPENSE METHOD
Sample On September 1, 2020, HUMSS Cafe paid 6-month rent to TVL
Transactio Commercial Building for P36,000. Prepare the adjusting entry as of
n December 31, 2020.
Initial September 1, 2020 September 1, 2020
Entry
(Upon
Payment)

Analyis for Debit entry is charged to asset Debit entry is charged to expense
Initial account (a balance sheet account) account (an Income Statement
Entry Examples: Prepaid Rent; Insurance account)
premium Examples: Prepaid Expense;
Insurance Expense
Adjusting December 31, 2020 December 31, 2020
Journal
Entry
(end of
accounting
period)
Analysis Under Asset Method, AJE Under Expense Method, AJE
for AJE recognizes expired portion recognizes unexpired portion

Trigger question for students:

Do the Asset Method and Expense Method of recording Prepayments result in the same
end balance for the accounts? Answer: Yes

ASSET METHOD
Prepaid Rent Rent Expense
09/01 36,000
24,000 AJE 12/31 AJE 12/31 24,000
End balance 12,000 End balance 24,000

EXPENSE METHOD

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 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
Prepaid Rent Rent Expense
09/01 36,000
AJE 12/31 12,000 12,000 AJE 12/31
End balance 12,000 End balance 24,000

4. UNEARNED INCOME or PRE-COLLECTIONS

- It is related to revenue wherein cash is received first before services are rendered.

Two Methods of recording:

NOTE: JOURNAL RECORD in the book of TVL Commercial Building
Method (a) LIABILITY METHOD (b) REVENUE METHOD
Sample On September 1, 2020, TVL Commercial Building received P36,000 cash
Transactio from HUMSS Co. for six months rent. Prepare the adjusting entry on
n December 31, 2020.
Initial September 1, 2020 September 1, 2020
Entry
(Upon
Receipt of
Cash)

Analyis for Credit entry to a liability account Credit entry to an expense account
Initial (a balance sheet account) (an Income Statement account)
Entry
Adjusting December 31, 2020 December 31, 2020
Journal
Entry
(end of
accounting
period)
Analysis Under Liability Method, AJE Under Expense Method, AJE
for AJE recognizes earned portion recognizes unearned portion

Trigger question for students:

Do the Liability Method and Revenue Method of recording Unearned Income result in the
same end balance for the accounts? Answer: Yes

LIABILITY METHOD
Unearned Rent Revenue Rent Revenue
09/01 36,000
AJE 12/31 24,000 AJE 12/31 24,000
End balance 12,000 End balance 24,000

EXPENSE METHOD

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 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
Unearned Rent Revenue Rent Revenue
09/01 36,000
AJE 12/31 12,000 AJE 12/31 12,000
End balance 12,000 End balance 24,000

5. BAD DEBTS/ DOUBTFUL ACCOUNTS/ UNCOLLECTIBLE ACCOUNTS

- expense that refers to the portion of accounts receivable that is in doubt of being
collected
Two Methods in recording
1. Direct method or “actual write-off method”, businesses recognized bad debts only
when portion of accounts receivable is confirmed to be uncollectible. The expense
is directly deducted from the accounts receivable by debiting the Bad Debts
Expense
2. Allowance method businesses recognized bad debts even the portion of the
accounts receivable is only estimated to be uncollectible. The expense is not
directly deducted from the accounts receivable instead it is credited to Allowance
for Doubtful Accounts. At the end of accounting period, the provided allowance is
deducted from Accounts Receivable

In this lesson, we will discuss only the allowance method. The following are three
methods of estimating doubtful accounts:
1. Percentage of accounts receivable
2. Aging the accounts receivable
3. Percentage of services rendered on account
Percent of Accounts Receivable
Problem: Before the preparation of financial statements, ABM Services estimates that
10% of Accounts Receivable is bad debts. The Accounts Receivable has a balance of
P150,000 and Allowance for Doubtful Accounts is P10,000. Compute for the required
allowance of doubtful accounts and prepare the necessary adjusting entry on March 31,
2020.
AR = P150,000
Estimated Bad Debts = 10%
P150,000 x 10% = P15,000
Required allowance = P15,000
Less: Recorded allowance= P10,000
Difference for adjustment P 5,000

To record Adjusting Entry

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 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
Allowance for Doubful Doubful Account
Accounts Expense
10,000 Beginning record 10,000
5,000 AJE 3/31 5,000
End balance 15,000 15,000 End balance

Aging the accounts receivable

Before the preparation of financial statements, Ages of accounts

ABM Services estimates that the uncollectible Receivable Balance
is based on the information in aging of 61-120 days P 30,000
receivables. The company’s aging of
121 -180 days 50,000
receivables report shows the following:
180 -365 days 70,000

Problem:
The company estimates that 5% of the ages 61-120 days; 7% of ages 121-180 days; and
10% of ages 180-365 days are bad debts. As per ledger, the Allowance for Doubtful
Account is P10,000. Compute the require allowance and prepare the adjusting entry for
June 30, 2020.

Computation:
61-120 days = P 30,000 x 5% = P 1,500
121 -180 days = 50,000 x 7% = 3,500
180 -365 days = 70,000 x 10% = 7,000
Required Allowance P 12,000
Less: Recorded allowance as per ledger 10,000
Difference for adjustment P 2,000

To record Adjusting Entry

Allowance for Doubful Doubful Account

Accounts Expense
10,000 Beginning record 10,000
2,000 AJE 6/31 2,000
End balance 12,000 12,000 End balance

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Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA

Percentage of services rendered on account

Problem ABM Services assume that the doubtful accounts is 3% of the service revenue
on account. As of Oct 31, 2020, the data are as follow:

Service Revenue P 850,000

Allowance for Doubtful Accounts 10,000

The total service revenue rendered on cash is P500,000. Solve for the required doubtful
accounts and prepare the adjusting at the end of October 31, 2020.

Computation:
Total Service Revenue P 850,000
Revenue rendered on cash 500,000
Revenue on account P 350,000
Doubtful accounts 3%
Required Allowance P 10,500
Less: Recorded allowance as per ledger 10,000
Difference for adjustment P 500

To record Adjusting Entry

Allowance for Doubful Doubful Account

Accounts Expense
10,000 Beginning record 10,000
500 AJE 12/31 500
End balance 10,500 10,500 End balance

6. DEPRECIATION
- allocation of depreciable cost of an asset over its estimated useful life in years
- Depreciation is only applies to tangible noncurrent assets or the property, plant and
equipment, except land.
- These assets are expected to provide benefit over several years to the business, they
should first be recorded as assets and their cost is gradually expensed over its useful
life. This used portion is called “depreciation expense”
Methods in computing depreciation expense
1. straight-line (focus of discussion)
2. sum-of-years digit;

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Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
3. declining and double declining methods

Straight-line method
- This adjusting entry affects the accounting equaton in the following manner:
*Assets will go down because the credit to accumulated depreciation will bring
down the book value of the building.
*Equity will go down because an expense is recorded- Depreciation Expense
formula for depreciation:

Annual Depreciation = Acquisition Cost – Salvage Value

Estimated useful life

Acquisition Cost - purchase price of the asset

Salvage Value - value of the asset at the end of its useful life
Depreciable Cost - the difference between the acquisition cost and the salvage value.
Estimated useful life - estimated number of years an asset can be used in the business.

Problem: On June 1, Shane Salvage Value = P85,000 x 10%

Photography purchase digital = P 8,500
camera for P85,000. The Depreciable Cost = P85,000 – P8,500
equipment has an estimated = P76,500
useful life of five years. Ms. P76,700 Depreciable Cost
Shane allocate 10% of the 5 Estimated Useful years
acquisition cost for salvage = P15,300 Annual Depreciation
value. = P15,300 ÷12 months
= P1,275 Monthly Depreciation

Allocation of Depreciation:
Months used is from June 1 – December 31
= 7 months
= P1,275 x 7
= P8,925 Accumulated Depreciation and
Depreciation Expense from June 1- December 31

To record Adjusting Entry

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Telephone No.: (045) 435-27-28; Email Address: [email protected]
 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
Accumulated Depreciation Depreciation Expense
8,925 AJE 6/31 8,925
End balance 8,925 8,925 End balance

Address: High School Blvd., Brgy. Lourdes, City of San Fernando (P)
Telephone No.: (045) 435-27-28; Email Address: [email protected]
 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
Application ( 15 minutes)
Activity: Quiz bee by pair

Instructions:
1. Have the students choose their partner, preferably their seatmate.
2. Ask each pair to get their quiz bee board (a 1/16 illustration board or sheets of paper)
and markers or chalk.
3. In pairs, ask the students to answer the activity below by identifying the type of
adjustment needed and preparing adjustment entries.
4. Conduct the quiz bee activity by showing the questions one at a time, with each pair
taking turns to answer.

Problem:
Jean Lagman, who owns a building in Makati, leases out store and office spaces to tenants
for a monthly rental of P15,000. For each of the following information provided on
December 2020, identify what kind of adjustment is needed (accrued expense, accrued
income, prepaid expense, unearned income, depreciation, bad debts) and prepare necessary
Powerpoint
adjustments for December 31, 2020.
presentation
, Laptop,
__________ a. Two tenants have not paid for the December rent.
Projector/
__________ b. Prepaid Insurance expense of P12,000 represents a one-year insurance paid
Printed
on Octover 15, 2020.
handouts
__________ c. The employment contract staes that an employee is to receive a monthly
salary of P7,500 payable every 2 nd day of the month for salary covering the last hal of the
Chalk and
previous month and every 17th of the month for salary covering the first half of the current
Board
month. Five employees were hired by the lessor.
__________ d. The building being rented was constucted June 2020 with the total cost of
P5,000,000 with an estimated useful years of 20 year.
__________ e. Rental income included advance collection of P15,000 of which only 50%
was earned at the end of the accounting period.
__________ f. As per ledger record, there were unpaid rental fees from previous customers
amounting to P100,000 of which 15% is confirmed to be uncollectible.

Learning Competencies/Objectives ( 60 Minutes)

Learning Competency: prepares adjusting entries
Activity ( 10 minutes)
Activity: Pass the ball: Share what you can remember Small Ball
Instructions:
1. If possible, have the students sit in a circle.

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Telephone No.: (045) 435-27-28; Email Address: [email protected]
 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
2. Choose one student to start with the ball.
3. The student with the ball should share one thing they remember about the previous
sessions’ (Day 1, 2, 3) lesson discussion.
4. After sharing, they pass the ball to another student in the circle.
5. The next student should share a different point or idea related to the same lesson
discussion before passing the ball to another student.
6. The game continues with each student sharing a new point or idea related to the previous
session's lesson discussion before passing the ball to someone else.
7. If a student cannot think of a new point or idea, they can pass the ball to someone else in
the circle.
8. The game continues until everyone has had a turn or until the time for the activity is up.
Analysis ( 5 minutes)

1. How did you find the activity?

2. What do you feel during the passing of ball?
3. How did the activity help you recall the previous session's lesson discussion?
4. What did you learn from hearing your classmates' contributions during the
activity?
Abstraction ( 15 minutes)
Since the discussion of lessons for adjusting entry was completed from last session, before Powerpoint
moving on to more practice problems for lesson mastery, let the students summarize the presentation
important points in adjusting. Use the table below for guided recap. Expected lesson , Laptop,
summary provided in the next table Projector/
Balances Printed
Reason for Adjusting
Adjustment Before Movement handouts
Adjustment Entry
Adjustments
Accrued Revenue *Assets is Debit: Asset Asset: Increase Chalk and
Revenu already understated Board
received but
not yet received *Revenue is Credit: Revenue Revenue: Increase
in cash nor understated
recorded
Accrued Expenses
Unearned revenue
– Liability Method
Unearned Revenue
– Revenue Method
Prepaid Expense –
Asset Method
Prepaid Expense:
Expense Method
Bad Debts
Depreciation

Completed Table:
Balances
Reason for Adjusting
Adjustment Before Movement
Adjustment Entry
Adjustments

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Telephone No.: (045) 435-27-28; Email Address: [email protected]
 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
Accrued Revenue Assets is Debit: Asset Asset: Increase
Revenu already understated
received but Credit: Revenue
not yet received Revenue is Revenue: Increase
in cash nor understated
recorded
Accrued Expense Expese is Debit: Expense Expense: Increase
Expenses already understated
incurred but not Credit: Liability
yet paid in cash Liabiltiy is Liability: Increase
nor recorded understated
Unearned Unearned Liability is Debit: Liability Liability:
revenue – revenue already overstated Decrease
Liability incurrec Revenue is Credit: Revenue
Method understated
Revenue: Increase
Unearned Revenue not Revenue is Debit: Revenue Revenu: Decrease
Revenue – yet earned overstated
Revenue Liability is Credit: Liability Liabiltiy: Increase
Method understated
Prepaid Prepaid Expense is Debit: Expense Expense: Increase
Expense – expense understated
Asset already used up Asset is Credit: Asset Asset: Decrease
Method or consumed overstated
Prepaid Expense not yet Asset is Debit: Asset Asset: Increase
Expense: incurred undesrtated
Expense Expense is Credit: Exepnse Expense:
Method overstated Decrease
Bad Debts Allocation of Debit: Bad debt Expense: Increase
uncollectible expense
account Credit: Asset: Decrease
Allowance for (Contra asset
Bad debts account: Increase)
Depreciation Allocation of Debit: Expense: Increase
depreciated Depreciation
cost of an asset Expense Asset: Decrease
Credit: (Contra asset
Accumulated account: Increase)
Depreciation

Application ( 30 minutes)
Individual activity: Powerpoint
Instructions: presentation
1. Ask the students to get their journal book, notes/ activities on the accounting cycle for , Laptop,
Shane Photography Projector/

Address: High School Blvd., Brgy. Lourdes, City of San Fernando (P)
Telephone No.: (045) 435-27-28; Email Address: [email protected]
 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
2. Ask the students to continue the accounting cycle for Shane Photography this time, in
the adjusting entries part using the additional information for adjustments below.
3. After preparing the AJE, post the entries to the ledger.
Additional Information for adjustments:
1. Digital camera & manual camera have expected useful life of 2 years.
2. Unused photo papers and ink supplies amounting to P1,000
3. Update the remaining rental of the Commercial Building
4. Completed 50% of the photography services from transaction dated June 27.

Solutions: (Please refer to transactions provided in journalizing step)

1. Digital camera & manual camera have expected useful life of 2 years.
Refer to Transaction on June 5
Type of adjustment: Depreciation of Photography Equipment
Digital Cam P 60,000
Manual Cam P 25,000
P85,000
÷ 24 months (2yrs x 12mos)
P3,541.67 monthly depreciation expense
Printed
2. Unused photo papers and ink supplies amounting to P1,000
handouts
Refer to Transaction on June 5
Type of Adjustment: Prepayment of Photography Supplies
Chalk and
Purchased P8,000
Board
Returned P(1500)
Available P6,500
P(1000) Remaining at the end of the month
P5,500 Used Supplies

3. Update the remaining rental of the Commercial Building

Refer to Transaction on June 6
Type of Adjustment: Prepayment of Rent for Commercial Building
Prepaid Rent for 6 months P36,000
÷ 6 months
P 6000 monthly rental

4. Completed 50% of the photography services from transaction dated June 27.
Refer to Transaction on June 27
Type of Adjustment: Unearned Income
P 15,000 Advance payment form customer
x 50% Completed service
P 7,500 Earned revenue

Address: High School Blvd., Brgy. Lourdes, City of San Fernando (P)
Telephone No.: (045) 435-27-28; Email Address: [email protected]
 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
Adjusting Journal Entries:

Below is the updated records of Shane Photography after adjustments:

Address: High School Blvd., Brgy. Lourdes, City of San Fernando (P)
Telephone No.: (045) 435-27-28; Email Address: [email protected]
 Republic of the Philippines
Department of Education
REGION III
SCHOOLS DIVISION OF PAMPANGA
REFERENCES
Manuel, Z.V.C. (2011) 21st Century Accounting Process (17th Edition). ISBN 978-971-93680-0-7
Millan, Z.V.B. (2018) Financial Accoutning and Reporting (Fundamentals). Bandolin Enterprise. ISBN
978-621-8029-07-1
Abenojar, R.A. (2020) Fundamentals of ABM 1 – Module 9: Accoutning Cycle for Service Business. SDO
Pampanga Module

Prepared by:

MARIZ JEAN C. SANGCAP

SHS Secondary School Teacher III
Pasig National High School
Candaba, Pampanga

Address: High School Blvd., Brgy. Lourdes, City of San Fernando (P)
Telephone No.: (045) 435-27-28; Email Address: [email protected]