Professional Documents
Culture Documents
ACCOUNTS EFFECTS
Example: Payment of advertising Advertising INCREASE
expense expense
Cash DECREASE
1. Owner’s contribution to the Cash INCREASE
business Owner’s INCREASE
equity
2. Purchase of inventory for cash Inventory INCREASE
Cash DECREASE
3. Sale on cash basis and the Cash INCREASE
charging of the cost of the Sales INCREASE
goods sold as expense Cost of INCREASE
sales/ Cost
of goods
sold
Inventory DECREASE
4. Purchase of equipment for cash Equipment INCREASE
Cash DECREASE
5. Payment of interest expense Interest INCREASE
expense
Cash DECREASE
PROBLEM 6: IDENTIFYING THE ACCOUNTS AFFECTED
ACCOUNTS EFFECTS
1. Owner’s withdrawals from Owner’s INCREASE
the business drawings
Cash DECREASE
2. Sale on account and the Accounts INCREASE
charging of the cost of the receivable
goods sold as expense Sales INCREASE
Cost of sales INCREASE
Inventory DECREASE
3. Collection of accounts Cash INCREASE
receivable Accounts DECREASE
receivable
4. Obtaining a loan Cash INCREASE
Notes payable INCREASE
5. Payment of the loan in #4 Notes payable DECREASE
above Cash DECREASE
6. Payment of salaries expense Salaries INCREASE
expense
Cash DECREASE
7. Purchase of inventory on Inventory INCREASE
account Accounts INCREASE
payable
8. Payment of accounts payable Accounts DECREASE
payable
Inventory DECREASE
9. Payments of various small Miscellaneous INCREASE
expenditures which do not expense
warrant separate presentation Cash DECREASE
10. The dog of the business owner NONE NONE
won 1st prize in an accounting NONE NONE
quiz bee.
PROBLEM 7: JOURNAL ENTRIES
1. Cash 100,000
Owner’s equity 100,000
2. Cash 800,000
Notes payable 800,000
3. Equipment 200,000
Cash 200,000
4. Inventory 500,000
Cash 500,000
5. Cash 120,000
Sales 120,000
1. Cash 1,000,000
Owner’s equity 1,000,000
4. Inventory 600,000
Accounts payable 600,000
6. Cash 700,000
Accounts receivable 700,000
5. Inventory 40,000
Cash 40,000
7. Freight-out 10,000
Cash 10,000
8. Cash 50,000
Accounts receivable 50,000
2. Cash 600,000
Notes payable 600,000
3. Equipment 450,000
Cash 450,000
5. Inventory 500,000
Accounts payable 500,000
6. Cash 200,000
Sales 200,000
5. Cash 10,000
Notes payable 10,000
8. Cash 50,000
Accounts receivable 50,000
JOURNAL ENTRIES:
A Company B Company
1. Cash 5
Owner’s capital 5
2. Cash 7
Owner’s capital 7
3. Cash 5
Notes payable 5
4. Equipment 6
Cash 6
5. Inventory 3
Cash 3
6. Cash 5 Inventory 15
Accounts receivable 10 Cash 5
Sales 15 Accounts payable 10
Cost of sales 3
Inventory 3
7. Cash 9
Sales 9
Cost of sales 5
Inventory 5
8. Accounts receivable 10
Sales 10
Cost of sales 5
Inventory 5
9. Cash 5 Cash 3
Accounts receivable 5 Accounts receivable 3
Accounts payable 5
Cash 5
ANSWERS TO QUESTIONS:
a. Answers: A Company = ₱11; B Company = ₱8; Side = ₱1
c. Answer: ₱5
d. Answer: ₱7
e. Answer: ₱5