It is a systematic process of identifying,

recording, measuring, classifying, verifying,

summarizing, interpreting and
communicating financial information. It
reveals profit or loss for a given period, and
the value and nature of a firm's assets,
liabilities and owners' equity.
*
*Presentation
Consistent reporting allows the owner to
look at information over different time
periods and compare results. Trend analysis
(gathering data and evaluating the pattern
or trend to assist in determining future
results) is able to be completed.
*Profitability
When information is properly recorded,
profitability is measured more easily

*
oThe journal is a
chronological record(day-
by-day) of business
transactions
oIt is called the book of
original entry because it is
the accounting record in
which financial
transactions are first
recorded. *
*The ledger refers to the accounting book in which
the accounts and their related amounts as recorded
in the journal are posted periodically.
*The ledger is called the “book of final entry”
because all the balances in the ledger are used in the
preparation of financial statements. This is also
called the T-account because the basic form of a
ledger is like the letter “T”.

*
1.G.Alajar opened a television repair shop he called “Sure Repair
Shop”. He began business by investing P 25,000 cash.
2.Paid P1,500 for newspaper advertising announcing the opening
of his shop.
3.Purchased office tables and chairs and filing cabinets from
Cruz furniture on credit, P16,500.
4.Completed repair work for R. Gil on credit, 1,200.
Journals and ledgers can be compared to a
personal diary
WHY?
Because they are used to record the day-to-
day transactions of the business.
 *
*Rule 1: All accounts that normally contain a debit balance will increase in amount
when a debit (left column) is added to them, and reduced when a credit (right
column) is added to them. The types of accounts to which this rule applies are
expenses, assets, and dividends.
*Rule 2: All accounts that normally contain a credit balance will increase in
amount when a credit (right column) is added to them, and reduced when a debit
(left column) is added to them. The types of accounts to which this rule applies
are liabilities, revenues, and equity.
*Rule 3: Contra accounts reduce the balances of the accounts with which they are
paired. This means that (for example) a contra account paired with an asset
account behaves as though it were a liability account.
*Rule 4: The total amount of debits must equal the total amount of credits in a
transaction. Otherwise, a transaction is said to be unbalanced, and the financial
statements from which a transaction is constructed will be inherently incorrect.
An accounting software package will ]flag any journal entries that are
unbalanced.
*Cash
*Cash Equivalents – short-term and highly liquid investments
*Accounts Receivable – claims against customers arising from sale
of services of goods on credit.
*Notes Receivable – a written pledge that the customer will pay
the business a fixed amount of money on a
certain date.
*Inventories – assets which are (a) held for sale in the ordinary
course of business; (b) in the process of production for sale;
(c) in the form of materials or supplies to be consumed in
the production process or in the rendering of services.
*Prepaid Expenses – expenses paid for the business in advance.
*
*Property, Plant & Equipment – ex. Land, building,
machinery and equipment, furniture
& fixtures, motor vehicles and equipment.
*Accumulated Depreciation
*Intangible Assets – identifiable, nonmonetary assets
without physical substance.
ex. Goodwill, trademarks, brand names,
secret processes, subscription lists and non-
competition agreements.

*
*Accounts Payables – the business entity agrees to pay for the amount of goods
and services in the future.
*Notes Payable – the business entity promises to pay the other party a
specified amount of money on a specified future
date.
*Accrued Liabilities – ex. Salaries payable, utilities payable, interest payable,
and taxes payable.
*Unearned Revenues – the business entity receives payment before providing
its customers with good/services.
*Current Portion of a Long-term debt – These are portions of mortgage notes,
bonds, and other long-term indebtedness which are
to be paid within one year from the balance sheet
date.

*
* Mortgage Payable -

*
 *
*The process of recording transaction is called
journalizing.
*To organize the book of original entry and reduce
detailed recording, special journals are used.
*There are four kinds of special journals- Sales Journal,
Purchase Journal, Cash Receipts Journal, Cash
Disbursement Journal.
*
 *
*A. Cash Receipt Journal- is used to record all cash that
had been received
*B. Cash Disbursement Journal- is used to record all
transactions involving cash payments
*C. Sales Journal(Sales on Account Journal)- is used to
record all sales on credit
*D. Purchase Journal (Purchase on Account Journal)- Is
used to record all purchases of inventory on credit (or on
account).
 *
*The journal shows all information concerning a
particular transaction.
*The journal provides a chronological record of all the
financial events in the business over time.

If we want to know about a certain transactions of years or

months back, we can trace the said transactions as long as we
have the date of the said transaction. The entries in the journal
are arrange by date that makes it necessary to locate a
particular event.
*Ledger is a means of
accumulating in one
place all the
information about
changes in an asset,
liability, equity,
income, and expense
account.

*
*
*Step 1 : Analyze the transaction and determine
which accounts are affected and the direction
of the effect
*Step 2: Determine how to effect the direction
identified in step # 1 based on the normal
balances of the accounts.

*
 *

Step 1 :
Step 2:
The Company received cash from Cash is an asset account, therefore, its
the owner. normal balance is debit. From Step 1, the
transaction will increase the Cash account. In
As a result of the cash received, order to increase the cash account, it should
the Cash account will increase. be credited.

As a result of the owner’s Owner’s Capital is an equity account,

therefore its normal balance is credit. From
contribution, the Owner’s Capital Step 1, the transaction will increase the
will increase. Owner’s Capital Account. In order to increase
the Owner’s Capital Account, it should be
debited.

Journal Entry:
January 1, 2017 Cash ₱10,000
Owner’s Capital ₱10,000
(Owner contributed ₱10,000 to the company)
Step 1 :
Step 2:
The Company received cash from Cash is an asset account, therefore, its
cash sales to customers. normal balance is debit. From Step 1, the
transaction will increase the Cash account. In
order to increase the cash account, it should
As a result of the cash received, be credited.
the Cash account will increase. Sales is a revenue account, therefore its
normal balance is credit. From Step 1, the
As a result of the sales generated, transaction will increase the SalesAccount. In
the Sales accountwill increase. order to increase the Sales Account, it should
be credited.

* Example 2: On March 27, 2017, the company generated

cash sales of ₱14,000

Journal Entry:
March 27, 2017 Cash ₱14,000
Sales ₱14,000
(Company generate cash sales of ₱14,000 )
 * Example 3: On April 7, 2017, the Company delivered
merchandise at selling price of ₱15,000. Terms of sale is 30
days. The cost of the merchandise delivered is ₱10,000.

Step 1 :
A. The Company made sales on account to a customer.
As a result of the claim to collect that was generated, the Accounts Receivable
will increase.
As a result of the sales generated, the Sales account will increase.
B.The company delivered merchandise to customer.
As a result of the delivery to customer, the Inventory account will decrease.
Also, the inventory sold is transferred to cost of goods sold, the Cost of Goods
Sold account will increase.
Step 2:
A. The company made sales on account to a customer.
Accounts Receivable is an asset account, therefore, its normal balance is debit. From Step
1, the transaction will increase the Accounts Receivable account. In order to increase theAR
account, it should be debited.
Sales is a revenue account, therefore its normal balance is credit. From Step 1, the
transaction will increase the Sales Account. In order to increase the Sales Account, it should
be credited.
B. The company delivered merchandise to the customer.
*
Inventory is an asset account, therefore, its normal balance is debit. From Step 1, the
transaction will decrease the Inventory account. In order to decrease the Inventory account,
it should be debited.
Cost of Goods Sold is an expense account, therefore, its normal balance is debit. From Step
1, the transaction will increase the Cost of Goods Sold account. In order to increase the
CoGS account, it should be debited.
 * Example 3: On April 7, 2017, the Company delivered merchandise
at selling price of ₱15,000. Terms of sale is 30 days. The cost of the
merchandise delivered is ₱10,000 .
Journal Entry:
April 7, 2017 Accounts Receivable P15,000
Sales P15,000
<Company generate credit sales of P15,000>

April 7, 2017 Cost of goods sold P10,000

Inventory P10,000
<Company delivered merchandise on account>
Step 1 :
Step 2:
The Company received cash from the
customers. Cash is an asset account, therefore, its
normal balance is debit. From Step 1, the
As a result of the cash received, the Cash transaction will increase the Cash account. In
order to increase the cash account, it should
account will increase. be debited.
The claim from the customer is settled, Accounts Receivable is an asset account,
the Accounts Receivable account will therefore, its normal balance is debit. From
Step 1, the transaction will decrease the
decrease. Accounts Receivable account. In order to
decrease the AR account, it should be
* credited.

Journal Entry:
May 7, 2017 Cash ₱15,000
Accounts Receivable ₱15,000
(Company collected P15,000 from its customer)
 *

Step 1 :
The Company received a computer in Step 2:
exchange for an obligation to pay the Equipment is an asset account, therefore, its
normal balance is debit. From Step 1, the
supplier of the computer. transaction will increase the Equipment
As a result of the computer that was account. In order to increase the Equipment
received from the supplier,the Equipment account, it should be debited.
account will increase. Payable is a liability account, therefore, its
normal balance is credit. From Step 1, the
As a result of the obligation to pay that was transaction will increase the Payable
generated, Payable account will increase. account. In order to increase the AP account,
it should be credited.

Journal Entry:
July 1, 2017 Equipment ₱30,000
Payable ₱30,000
(Company collected P15,000 from its customer)
 Single journal entry debit cash receipt journal
Compound journal entry cash disbursement journal sales journal
Credit purchase journal

I.Identification: Choose from the box above what pertains the following statements.
1. A kind of special journal used to record all transactions involving cash payments.
2. A kind of special journal used to record all sales on credit.
3. A kind of special journal used to record all purchases of inventory on credit(or on account).
4. The sales revenue account have normal balance of _______.
5. This is an entry that requirex Q2
6. s three or more accounts.

II. Essay: 5 points each.

1. In your own words, what is a journal? Why is it called the book of original
entry?
2. In your own words, what is a ledger? Why is it called the book of final entry?
MAY 1- Your Business invested 250,000 into this entity.

ANALYSIS: Asset increased. Owner’s equity increased.

RULES: Increases in Assets are recorded by debits. Increases in
Owner’s Equity are recorded by credits
Entry: Increases in assets is recorded by a debit to cash. Increase
in owner’s equity is recorded by a credit to Yacapin, Capital.

Cash (A) 250,000

Yacapin, Capital(OE) 250,000
MAY 1- Rented office space and paid two months rent in advance,
8,000.
ANALYSIS: Asset increased. Assets decreased.
RULES: Increases in Assets are recorded by debits. Decreases in
Assets are recorded by credits
Entry: Increases in assets is recorded by a debit to Prepaid Rent.
Decrease in Asset is recorded by a credit to cash.

Prepaid Rent (A) 8,000

Cash(A) 8,000
May 2- The business issued a promissory note for 210,000 loan from
Metrobank. The note carries a 20% interest per annum. The
arrangement with the bank is that both the interest and the principal
are payable in full in one year.
ANALYSIS: Asset increased. Liabilities increased.
RULES: Increases in Assets are recorded by debits. Increases in
liabilities are recorded by credits.
Entry: Increases in assets is recorded by a debit to Cash. Incresed
in liability is recorded by a credit to notes payable..

Cash(A) 210,000
Notes PayableI(L) 210,000
May 4- Acquired service vehicle for 420,000
ANALYSIS: Asset increased. Asset decreased.
RULES: Increases in Assets are recorded by debits. Decreases in
Assets are recorded by credits
Increase in assets is recorded by a debit to service vehicle.
Decrease in assets is recorded by a credit to cash.

Service Vehicle(A) 420,000

Cash (A) 420,000
May 5- Acquired office equipment from J & F for 60,000; paying
15,000 in cash and the balance next month.
ANALYSIS: Asset increased. Asset decreased. Liabilities increased
RULES: Increases in Assets are recorded by debits. Decreases in
Assets are recorded by credits. Increases in Liabilities are recorded
by credits.
Increase in assets is recorded by a debit to office equipment.
Decrease in assets is recorded by a credit to cash. Increase in
liabilities is recorded by a credit to Accounts Payable
Office Equipment (A) 60,000
Cash (A) 15,000
Accounts Payable(L) 45,000
 `
May 8- Purchased supplies on credit for 18,000 from San Jose
Merchandising.
ANALYSIS: Asset increased. Liabilities increased
RULES: Increases in Assets are recorded by debits. Increases in
Liabilities are recorded by credits.
Increase in assets is recorded by a debit to Supplies. Increase in
liabilities is recorded by a credit to Accounts Payable

Supplies(A) 18,000
Accounts Payable(L) 18,000
May 9- Paid San Jose Merchandising 10,000 of the amount owed.
ANALYSIS: Asset decreases. Liabilities decreased.
RULES: Decreases in Assets are recorded by credits. Decreases
in Liabilities are recorded by debits.
Decrease in assets is recorded by a credit to Cash. Decrease in
liabilities is recorded by a debit to Accounts Payable.

Accounts Payable(L) 10,000

Cash(A) 10,000
May 10- Coordinated and finalized simple bridal arrangements for
three couples and collected fees of 8,800 per couple.
ANALYSIS: Asset increased . Revenue increased.
RULES: Increases in Assets are recorded by debits. Increase in
Revenue are recorded by credits.
Increase in assets is recorded by a debit to Cash. Increase in
Revenue is recorded by a credit to Consulting Revenue.

Cash(A) 24,600
Consulting Revenue(R) 24,600
May 13- Paid Salaries 6,600
ANALYSIS: Asset decreased. Expenses increased.
RULES: Decreased in Assets are recorded by credits. Increase in
Expenses are recorded by debits.
Decrease in asset is recorded by a credit to Cash. Increase in
Expenses is recorded by a debit to Salaries Expense.

Salaries Expense (E) 6,000

Cash(A) 6,000
May 13- Your business is earning additional revenues by referring
consulting clients to friendly hotels, caterers, printers, and couturiers.
Received 10,000 advance fees for three clients referred.
ANALYSIS: Asset increased. Liabilities increased.
RULES: Increased in Assets are recorded by debits. Increase in
Liabilities are recorded by credits.
Increase in asset is recorded by a debit to Cash. Increase in
Liability is recorded by a credit to Unearned Referral Revenues.

Cash(A) 10,000
Unearned Referral Revenues(L) 10,000
May 15- Your business is earning additional revenues by referring
consulting clients to friendly hotels, caterers, printers, and couturiers.
Received 10,000 advance fees for three clients referred.
ANALYSIS: Asset increased. Liabilities increased.
RULES: Increased in Assets are recorded by debits. Increase in
Liabilities are recorded by credits.
Increase in asset is recorded by a debit to Cash. Increase in
Liability is recorded by a credit to Unearned Referral Revenues.

Cash(A) 10,000
Unearned Referral Revenues(L) 10,000
May 19- Coordinated and finalized elaborate bridal arrangements for
three couples and billed fees of 12,000 per couple.
ANALYSIS: Asset increased. Revenues increased.
RULES: Increased in Assets are recorded by debits. Increase in
Revenue are recorded by credits.
Increase in asset is recorded by a debit to Cash. Increase in
Revenue is recorded by a credit to Consulting Revenue

Accounts Receivable(A) 36,000

Consulting Revenue(R) 36,000
May 30- Received the ICC- Bayan Tel telephone bill, 1,400
ANALYSIS: Liabilities increased. Expense increased.
RULES: Increased in Liabilities are recorded by credits. Increase in
Expense are recorded by debits.
Increase in Liability is recorded by a credit to Utilities Payable.
Increase in Expenses is recorded by a debit to Utilities Expenses

Utilities Expense(E) 1,400

Utilities Payable(L) 1,400
May 30- Received the ICC- Bayan Tel telephone bill, 1,400
ANALYSIS: Liabilities increased. Expense increased.
RULES: Increased in Liabilities are recorded by credits. Increase in
Expense are recorded by debits.
Increase in Liability is recorded by a credit to Utilities Payable.
Increase in Expenses is recorded by a debit to Utilities Expenses

Utilities Expense(E) 1,400

Utilities Payable(L) 1,400
May 30- Received 24,000 from two clients for services billed last
May 19
ANALYSIS: Asset increased. Asset decreased.
RULES: Increased in Assets are recorded by debits. Decrease in
Assets are recorded by credits.
Increase in Asset is recorded by a debit to Cash. Decrease in
Asset is recorded by a credit to Accounts Receivable

Cash(A) 24,000
Accounts Receivable(A) 24,000
 The following are some of the transactions made
by N. Aglugub Cleaners
Apr. 1 Acquired cleaning supplies in the amount of
P260,000. A count of the supplies on Dec.31, 2002
amounted to 110,000
Aug.1 Received 360,000 from Cagayan Company for
cleaning janitorial uniforms over the next 3 years.
Nov. 1 Paid P240,000 for annual rent.

Office Supplies Office Supplies Expense

Prepaid Rent Rent Expense
Unearned Cleaning Revenues Cleaning Revenues
 The last day of the accounting period is Dec. 31
A. 3-days’ salaries are unpaid as at Dec. 31. Salaries are
75,000 for a 5-day work week.
B. On Aug. 1, a P18,000 premium was paid on a one-year
insurance policy. The amount of the premium was
debited to Prepaid Insurance.
C. Before adjustments, the Supplies account has a
balance of 35,400. The count of supplies on hand
amounted to P22,300.
D. Office equipment was purchased on Mar.3 for 270,000.
The expected life of the equipment is eight years
 Prepare the adjusting entry for each of the
following for the year ending Dec. 31,2017
A. Paid 24,000 for a 1-year fire insurance policy to
commence on Sept. 1. The amount of premium was
debited to Prepaid Insurance.
B. Borrowed 100,000 by issuing a 1-year note with 7%
annual interest to Century Savings Bank Oct. 1, 2017.
C. Paid 160,000 cash to purchase a delivery van (surplus)
on Jan. 1. The van was expected to
*Bank
Account
Savings Account Checking/Current Account
These are intended to provide an incentive Money held under a checking account can be
for the depositor to save money. withdrawn through issuance of a check.
The depositor can make deposits and Banks usually allows numerous withdrawals
withdrawals using the form provided by the and unlimited deposit under this type of
bank. account.
Banks usually pay an interest rate that is The interest rate for checking account is
higher than a checking/current account. usually lower as compared to a savings
account.
Some savings account have a passbook, in The account holder or depositor of a
which transactions are logged in a small checking account is normally provided at the
booklet that the depositor keep. end of the month, a bank statement showing
all deposits made, checks paid by the bank,
and the balance of the account.
Some savings accounts charge a fee if the The depositor is given easy access to the
balance falls below a specified minimum. funds as compared to a savings account.

*
Time Deposit( Certificate of Deposit
Account)
type of a savings account that is held
for a fixed-term and can be withdrawn
only after the lapse of the agreed
period and by giving notice to the
bank.
The account may be withdrawn also
anytime however the bank usually
charges penalties.
This type of account yield high
interest.
ATM (Automated Teller
Machine)
A type of savings account
that is popularly used
nowadays.
Withdrawals can be made
through designated machines.
24 hour teller machine
and the funds can be
withdrawn anytime.
ATM (Automated Teller Machine)
In order to open a particular
account, the bank will require
individuals certain such as valid
ID card and will ask you to fill-up
the forms prepared by the bank.
Upon approval of the
application to open an account,
the bank will give the depositor
his account number.
*Withdrawal and Deposit Slip are
written orders to the bank. This slips
are used to take out money or to put in
money to the depositors account.

*
*The required information in the withdrawal slip are:
Account Name- the name of the depositor
Account Number- the unique identifier given by the bank
for every account maintained
Date of the withdrawal
Currency
Amount to be withdrawn
The amount in words and in figures are indicated.
Signature of the Depositor

*
*
*There are instances that the depositor
cannot attend personally to withdraw the
funds, he may authorize a representative
by indicating the name of the
representative in the space provided and
the representative must sign.
*There is a need for the representative to
bring a valid ID upon withdrawal.

*
*Deposit Slip
The usually required information in a deposit slip are:
Account Name- this is the complete name of the depositor that is
reflected in the records of the bank. If it has a pass book, the
account name is indicated on the 1st page inside the passbook.
Account Number- this is a unique identifier of the account
maintained by the depositor.
Date of Deposit
Type of Account
Currency
Amount in words and in figures
*
*Deposit Slip

*
*Deposit Slip

*
*Passbook

*
*A check is a document that orders a bank to pay a
specific amount of money from a person’s account
to the person in whose name the cheque has been
issued.
*Checks are a type of bill of exchange and were
develop as a way to make payments without the
need to carry large amounts of money.

*
*Parties involve in the transaction that use check as
a medium of exchange
Drawer- the person/entity who makes the check.
Payee- the recipient of the money.
Drawee- the bank or the financial institution
where the check can be presented for payment.

*
*At the end of every month, the bank furnishes a statement to
the depositor showing the movement of the account.

*It contain all the deposits, withdrawals, and balance of your

account after every transaction.

*It may also indicate bank charges that were deducted by the
bank automatically.

*Also interest earned by the account is likewise reflected.

*
*
*Examples of Debit Transaction
Bank Service Charge- monthly fee charge by the bank for its
services(Ex. Cost of printing checks, writing funds to other locations
and other fees)

NSF(Not Sufficient Fund)- Bank also use a debit memo when a

deposited check from a customer “bounces” because of insufficient
funds.

*Examples of Credit Transactions

Collection of cash proceeds from notes receivables.

Interest Income earned by the deposit.