Chapter 2 – Accounting for Business Transactions

Galicano del Mundo decided to establish a sole proprietorship business and named it as Del
Mundo Graphics Design. Del Mundo is a graphic desginer of a financial extensive experience
experience in drawing, layout, typography, lettering, diagramming and photography. He
possesses the talent to visually communicate to a target audience with the right combination of
words, images and ideas.

Del Mundo Graphics Design can do the layout and production design of newspapers, magazines,
corporate reports, journals and other publications. The entity can create promotional displays,
marketing brochures for services and products; packaging design for products; and distinctive
logos for businesses. He also enters into agreements with clients for the prorgressive
development and maintenance of their web sites. His initial revenue stream comes from web
designing.

The owner, Galicano del Mundo, makes the business decisions. The assets of the company belong
to Del Mundo and all obligations of the business are his responsibility. Any income that the entity
earns belongs solely to Del Mundo.

When a specific asset, liability or owner’s equity item is created by a financial transaction, it is
listed in the financial transaction worksheet using the appropriate accounts. The worksheet that
follows shows the first transaction of the Del Mundo Graphics Design. The dates are enclosed in
parenthesis.

During March 2019, the first month of operations, various financial transactions took place. These
transactions are described and analyzed as follows:

Mar. 1 Del Mundo started his new business by depositing P350,000 in a bank account in the name
of Del Mundo Graphics Design at BPI Poblacion Branch.

Mar. 5 Computer equipment costing P145,000 is acquired on cash basis.

Mar 9 Computer supplies in the amount of P25,000 are purchased on account.

Mar 11 Del Mundo Graphics Design collected P88,000 in cash for designing interactive web sites
for two exporters based inside the Ortigas Ecozone.

Mar 16 Del Mundo paid P18,000 to Ceradoy Bills Express, a one-stop bills payment service
company, for the semi-monthly utilities.

Mar 17 The entity has service agreements with several Netpreneurs to maintain and update their
web sites weekly. Del Mundo billed these clients P35,000 for services already rendered during
the month.

Mar 19 Del Mundo made a partial payment of P17,000 for the Mar. 9 purchase on account.

Mar 20 Checks totalling P25,000 were received from clients for billings dated Mar. 17.
Mar 21 Del Mundo withdrew P20,000 from the business for his personal use.

Mar 27 Warlito Blanche Publishing submitted a bill to Del Mundo for P8,000 worth of newspaper
advertisements for this month. Del Mundo will pay this bill next month.