Professional Documents
Culture Documents
Accounting
Accounting
PARTICULARS
DEBIT
CREDIT
2012
JAN
Cash
PHP 150,000.00
Equipment
PHP 100,000.00
Building
Mr. O, Capital
PHP 5,100,000.00
PHP 5,350,000.00
Note: Normal balance side of the elements (also, where the element-account increases)
Assets
Debit
Liabilities
Credit
Capital
Credit
Income
Credit
Expenses
Debit
3. Posting the process of transferring records from Journal to Ledger. (Ledger the book of final entry)
Cash
1-Jan
1-Jan
Dr
PHP 150,000.00
Building
Dr
PHP 5,100,000.00
Cr
1-Jan
Equipment
Dr
PHP 100,000.00
Mr. O, Capital
Cr
Dr
1-an
Cash in Bank
Petty Cash Account
Inventory
Accounts Receivable
Prepaid Expense
Land
Buildings
Accumulated Depreciation, Buildings
Vehicles
Accumulated Depreciation, Vehicles
Shop Equipment
Accumulated Depreciation, Shop Equipment
Office Equipment
Accumulated Depreciation, Office Equipment
Deposits
Liability Accounts
Current Liabilities
2002
Accounts Payable
2100
Employment Tax Payable
2300
Short Term Loans Payable
2350
Customer Deposits
2385
Current Portion of Long Term Debt
2400
Accrued Expenses
Long Term Liabilities & Equity
2501
Land Payable
2505
Equipment Payable
2510
Vehicles Payable
2514
Bank Loans payable
2551
Less Current Portion LTD
2805
Paid in Capital
2825
Beginning Equity
2830
Partners Contribution
2835
Partners Draw
Cr
Cr
PHP 5,350,000.00
Sales Accounts
3010
Frame Sales
3015
Other Sales
Direct Expense Accounts
4010
Shop or Design Labor
4015
Payroll Tax Expense
4023
Workers Comp Expense
4027
State Sales Tax Expense
4101
Materials
4200
Freight
4326
Engineering
4510
Outside Services
4550
Shop or Design Supplies
4647
Rental Expense
4700
Repair and Maintenance
4809
Small Tools
4830
Travel
4843
Lodging
4849
Meals
Indirect Expense Accounts (Overhead)
5010
Salaries & Wages, Office & Sales
5015
Payroll Tax Expense, Office & Sales
5023
Workers Comp Expense, Office & Sales
5300
Accounting
5312
Advertising
5330
Bank Fees
5341
Depreciation Expense
5345
Dues and Subscriptions
5353
Insurance: Product Liability
5355
Insurance: Vehicles
5358
Legal Fees
5550
Office Supplies
5600
Postage
5618
Research and Development
5700
Repair and Maintenance, Office
5762
Taxes and Licenses
5775
Telephone
5813
Training
5820
Utilities
Other Accounts
7050
Interest Income
7100
Cash Discounts
7200
Gain or Loss on Sale of Assets
8020
Interest Expense
4. Preparation of Trial Balance a list of accounts with ledger balances (unadjusted). Being prepared to test the accuracy
of Journalizing and Posting process.
$800.00
Accounts Receivable
400.00
Supplies
600.00
Prepaid Rent
Equipment
1,200.00
10,000.00
Accounts Payable
$3,000.00
Owner, Capital
Owner, Drawing
9,000.00
1,000.00
Sales
3,000.00
Salary Expense
700.00
Misc. Expense
300.00
$15,000.00
Credit
$15,000.00
Trial Balance
Dr.
Cash
37080
Accounts receivable
52320
Notes receivable
Adjustments
Cr.
Dr.
Dr.
Cr.
Income Statement
Balance Sheet
Dr.
Dr.
Cr.
37080
37080
51720
51720
24000
24000
24000
31650
31650
Prepaid insurance
4800
c-2500
2300
2300
Prepaid rent
4395
b-2800
1595
1595
Store supplies
1650
f-1000
650
650
13500
13500
13500
Acc-deprec. - furniture
10
Office equipment
11
Acc-deprec. - equip.
4500
12
Accounts payable
13
Owner's equity
14
drawings
4500
4500
15
Purchases
180000
180000
16
Sales
17
18
19
20
21
Advertising exp.
22
i-600
3000
g-1350
11700
31650
4350
4350
11700
h-2340
11700
6840
6840
28600
28600
28600
96000
96000
96000
289200
4500
180000
289200
6000
6000
2500
289200
6000
2500
5750
2500
5750
5750
36300
36300
3795
3795
3795
Delivery exp.
2850
2850
2850
23
Office exp.
3510
3510
3510
24
Office salaries
3000
3000
3000
25
Interest income
34200
d-2100
900
424700
900
900
424700
26
Rent exp.
b-2800
2800
2800
27
Insurance exp.
c-2500
2500
2500
28
29
Interest receivable
30
Interest revenue
31
f-1000
1000
1000
32
g-1350
1350
1350
33
h-2340
2340
2340
34
i-600
600
600
35
a-40000
40000
36
Income summary
d2100
e-200
2100
2100
200
e-200
52890
200
200
a-40000
52890
Net Income
200
40000
40000
470690
40000
470690
49355
332800
Cr.
49355
332800
187245
187245
adjustment for any income collected but not yet earned and for any expenses paid but not yet incurred.
Example1: Being a Lessor, on March 31, 2012 you received advance payment for a one year rent from a tenant who will start
renting your property on the same date. Annual Rent is Php 600,000.00.
Deferral of Income
Income method
Date
Particulars
Debit
Liability method
Credit
2012
Mar 31
Cash
PHP 600,000.00
Rent Income
to record precollected one
year rent
Dec 31
Particulars
Debit
Credit
2012
Rent Income
Mar 31
PHP 600,000.00
PHP 150,000.00
Unearned Rent
Cash
PHP 600,000.00
Unearned Rent
to record precollected one
year rent
Dec 31
PHP 150,000.00
Unearned Rent
PHP 600,000.00
PHP 450,000.00
Rent Income
to record adjustment
PHP 450,000.00
to record adjustment
Computation:
Mar31 to Dec31 is 9 months. Rent Income is Php 450,000 (Php 600,000 x 9/12) or (9 months x Php 50,000*)
*Php50,000 is the monthly rent (Php600,000/12).
Example2: Being a Lessee, on March 1, 2012 you gave advance payment for a one year rent to the landlord for a lease that
will start on the same date. Annual Rent is Php 600,000.00.
Deferral of Expense
Expense method
Date
Particulars
Debit
Asset method
Credit
2012
Mar 1
Debit
Credit
2012
Rent Expense
PHP 600,000.00
Cash
to record prepayment of
one year rent
Dec 31
Particulars
Prepaid Rent
Rent Expense
to record adjustment
Mar 1
PHP 600,000.00
PHP 100,000.00
PHP 600,000.00
Cash
to record prepayment of
one year rent
Dec 31
PHP 100,000.00
Prepaid Rent
Rent Expense
Prepaid Rent
PHP 600,000.00
PHP 500,000.00
PHP 500,000.00
to record adjustment
Computation:
Mar1 to Dec31 is 10 months. Rent Expense is Php 500,000 (Php 600,000 x 10/12) or (10 months x Php 50,000*)
*Php50,000 is the monthly rent (Php600,000/12).
Note: With the examples above, the reporting period is assumed to be of calendar year. But take note that period for reporting
maybe Calendar (ending December 31) or Fiscal (ending any date not December 31). Hence, if reporting period will be September
30, For Deferral of Income example, months earned will only be from March 31 to September 30 only or 6 months. For Deferral of
Expense example, if reporting period is September 30, months incurred will be from March 1 to September 30 only or 7 months.
Orlando DR Manalang, CPA
Proforma Entry:
DATE
PARTICULARS
2012
Dec
31 Depreciation Expense
Accumulated Depreciation
DEBIT
CREDIT
xx
xx
Example: The building invested by Mr. O is estimated to be used for 20 years (refer to journalizing example). Salvage value is
Php 100,000.00. The adjusting entry on December 31 is
DATE
PARTICULARS
F
DEBIT
CREDIT
2012
Dec
31 Depreciation Expense - Building
PHP 250,000.00
Accumulated Depreciation - Building
PHP 250,000.00
Computation:
Depreciation Expense =
DEBIT
CREDIT
xx
xx
Basis for giving Allowance for Doubtful Accounts (the amount to be deducted from Gross Accounts Receivable to arrive at the
Net Realizable Value of Accounts Receivable)
% of Sales Income Statement approach (ex. The company provides 1% of Net Sales as Bad debts expense every year)
% of Accounts Receivable Balance Sheet approach (ex. The company provides allowance for bad debts as 2% of
Accounts Receivable)
From aging of Accounts Receivable (Receivables are being categorized by days of past due and certain percentage of
probability of not collecting such accounts are applied to every category)
Per Balance Sheet :
Account Receivable, gross
Allowance for Doubtful Accounts
Net Realizable Value of A/R
xx
(xx)
xx
PARTICULARS
d1 Allowance for Doubtful Accounts
Accounts Receivable
DEBIT
CREDIT
xx
xx
DEBIT
CREDIT
xx
xx
xx
xx
xx
Beginning Balance
Recovery
Provision
xx
Example: Allowance for bad debts is based on 20% of Accounts Receivable for the year.
Year 1
Year 2
Year 3
Year 4
A/R
PHP 1,000,000.00 PHP 1,250,000.00 PHP 1,562,500.00 PHP 1,953,125.00
ADA (20%)
PHP 200,000.00
PHP 250,000.00
PHP 312,500.00
PHP 390,625.00
Year 1: Accounts Receivable written off is Php 50,000.00
Recovered Accounts previously written off is Php 15,000.00
Computation for Adjustment:
PHP 50,000.00
PHP 200,000.00
Balance, end.
PHP 15,000.00
PHP 235,000.00
Balance, beg.
Recovery
Provision
(worked back)
PHP 250,000.00
DATE
Year 1
Month
PARTICULARS
D1 Bad Debts
Allowance for Doubtful Accounts
To record provision for Bad Debts
PHP 250,000.00
DEBIT
CREDIT
PHP 235,000.00
PHP 235,000.00
PHP 30,000.00
PHP 250,000.00
Balance, end.
PHP 280,000.00
DATE
Year 2
Month
PARTICULARS
Balance, beg.
PHP 200,000.00
PHP 45,000.00
PHP 35,000.00
Recovery
Provision
(worked back)
PHP 280,000.00
DEBIT
D2 Bad Debts
Allowance for Doubtful Accounts
To record provision for Bad Debts
CREDIT
PHP 35,000.00
PHP 35,000.00
Sales
Bad debts
Year 1
PHP 1,000,000.00
PHP 200,000.00
Year 2
PHP 1,250,000.00
PHP 250,000.00
Year 3
PHP 1,562,500.00
PHP 312,500.00
Year 4
PHP 1,953,125.00
PHP 390,625.00
PHP 50,000.00
PHP 165,000.00
Balance, end.
PHP 15,000.00
PHP 200,000.00
Balance, beg.
Recovery
Provision
PHP 215,000.00
DATE
Year 1
Month
PARTICULARS
D1 Bad Debts
Allowance for Doubtful Accounts
To record provision for Bad Debts
PHP 215,000.00
F
DEBIT
CREDIT
PHP 200,000.00
PHP 200,000.00
PHP 51,000.00
PHP 10,000.00
9,000.00
1,000.00
500.00
500.00
21,000.00
PHP 30,000.00
PHP 800,000.00
PHP 30,000.00
PHP 830,000.00
PHP 5,000.00
PHP 825,000.00
ASSETS
Cash
Accounts Receivable
Cars
Equipment
Furniture & Fixtures
Total
Orlando DR Manalang, CPA
Loans Payable
Sorio, Capital
PHP
100,000.00
825,000.00
PHP
925,000.00
PHP 2,000.00
-45,000.00
-55,000.00
-100,000.00
50,000.00
-5,000.00
100,000.00
145,000.00
PHP 47,000.00
0.00
PHP 47,000.00
DATE
2012
Dec
DATE
2012
Dec
31 Income Accounts
Income & Expense Summary
b. Close Expense Accounts
PARTICULARS
CREDIT
xx
xx
DEBIT
DEBIT
CREDIT
xx
xx
DEBIT
CREDIT
xx
xx
F
DEBIT
CREDIT
xx
xx
DATE
2012
Dec
31 Owner, Capital
Owner, Drawing
DEBIT
CREDIT
xx
xx
8. Preparation of Post-Closing Trial Balance checking the accuracy of adjustment and closing process.
9. Journalizing and Posting of Reversing Entries done every first day of next accounting period.
Adjusting entries that are subject to reversal; Accruals, Deferral of income (under income method),Deferral of
expense (under expense method)
Example: Refer to adjustment example
Income method
Date
Particulars
Debit
2012
Mar 31 Cash
PHP 600,000.00
Rent Income
Dec 31 Rent Income
PHP 150,000.00
Unearned Rent
Jan 1 Unearned Rent
PHP 150,000.00
Rent Income
Date
Particulars
2012
Mar 31 Rent Expense
Cash
Dec 31 Prepaid Rent
Rent Expense
Jan 1 Rent Expense
Prepaid Rent
Orlando DR Manalang, CPA
Expense method
Debit
Credit
PHP 600,000.00
PHP 150,000.00
PHP 150,000.00
Credit
PHP 600,000.00
PHP 600,000.00
PHP 100,000.00
PHP 100,000.00
PHP 100,000.00
PHP 100,000.00