ACCOUNTING PROCESS

Dahon Car parts and Services, was established as a business on January 1, 20x1. It
purchases and supplies various car parts and provides repair/cleaning services for
their customers’ cars. The following are the transactions that happened for its first
year in business:

January 1: Initial cash investment by the owner Mr. Jobs, Pablo, worth P2,000,000.

February 1: Bought various supplies through cash which will be used evenly for 1
year, worth P48,000. Recorded through expense method.

March 1: Purchased car parts on credit from Mr. A, worth P230,000. Shipping costs
P20,000, with terms FOB Shipping Point, Freight Prepaid.

March 15: Purchased car parts on credit from Mr B., amounting P180,000. However,
some of the car parts were damaged and returned to the supplier, worth P30,000.

March 31: Availed new space, and paid rent in advance, worth P100,000 for 10
months. Recorded through asset method.

March 31: Bought equipment and provided promissory note as payment, with
acquisition cost of P200,000, and salvage value of P20,000. The equipment can be
used for 5 years. The promissory note is an interest-bearing note with 12% rate of
interest to be paid annually starting March 31 in the succeeding year.

April 15: Signed the rent contract, referring to the rent paid in advance on March 31.

June 30: Sold various car parts on credit for P200,000.

July 15: Customers returned some of our products worth P20,000 sales price, which
are in good condition.

August 30: Collected half of the receivables.

September 1: Engaged a repairing service contract with a customer, worth P180,000

which will last for 6 months of service, cash was collected in advance. The entire
amount was credited initially as income.

October 1: Engaged in a 1-year cleaning service contract with a customer, worth

P120,000, cash collected in advance. The entire amount was credited initially as
liability.

December 31: Incurred various Service Expenses amounting to P100,000. Received

Utilities Bills in relation to operations with a due amount of P150,000.

At the end of the year, an inventory count was conducted and car parts worth
P50,000 remain in the stockroom.