Professional Documents
Culture Documents
In this module, you are required to go through a series of learning activities in order
to complete each learning outcome. In each learning outcome are Information
Sheets, Self-Checks, Work Sheets and Task Sheets. Follow and perform the
activities on your own. If you have questions, do not hesitate to ask for assistance
from your trainer.
Remember to:
• Work through all the information and complete the activities in each section.
• Read information sheets and complete the self-check. Suggested references are
included to supplement the materials provided in this module.
• Most probably, your trainer will also be your supervisor or manager. He is there to
support you and show you the correct way to do things.
• You will be given plenty of opportunities to ask questions and practice on the job.
Make sure you practice your new skills during regular work shifts. This way, you will
improve your speed, memory and your confidence.
• Use the Self-Checks, Work Sheets or Task Sheets at the end of each section to test
your own progress. Use the Performance Criteria Checklist or Procedural Checklist
located after the sheet to check your own performance.
You need to complete this module before you can perform the next module, Post
Transactions.
LEARNING OUTCOMES:
2. Analyze documents
ASSESSMENT CRITERIA:
1. List of asset, liability, equity, income, and expense account titles are prepared in
accordance with Generally Accepted Accounting Principles.
2. Chart of Accounts is coded according to industry practice.
3. Documents are gathered, checked and verified in accordance with verification and
validation processes.
4. Account titles are selected in accordance with standard selection processes.
5. Journal entries are prepared in accordance with generally accepted accounting
principles.
6. Debit and credit account titles are determined in accordance with chart of accounts.
7. Explanation to journal entry is prepared in accordance with the nature of transaction.
ASSESSMENT CRITERIA:
1. List of asset, liability, equity, income, and expense account titles are prepared in
accordance with Generally Accepted Accounting Principles.
RESOURCES:
Calculator
Paper
Learning Materials
Pencil
Eraser
REFERENCES:
SPECIAL INSTRUCTIONS
LEARNING ACTIVITIES
2. Answer Self-Check for 1.1-1 and 1.1-2 Compare answers with the answer key.
You are required to get all answers
correct. If not, read the information
sheets again to answer all questions
correctly.
There is some confusion over the distinction between “Bookkeeping” and “Accounting”. This
partly due to the fact that the two are related.
DEFINITIONS OF ACCOUNTING
DEFINITIONS OF BOOKKEEPING
Bookkeeping is a mechanical task involving the collection of basic financial data. The data
are first entered in the accounting records or the books of accounts, and then extracted,
classified and summarized in the form of income statement, balance sheet and cash flows
statement.
A bookkeeper may be responsible for keeping all of the records of a business. Much of the
work of the bookkeeper is clerical in nature and is increasingly being accomplished through the
use of mechanical and electronic equipment.
The bookkeeping procedures usually end when the basic data have been entered in the books
of accounts and the accuracy of each entry has been tested. At that stage, the accounting
Based on the definition, accounting has four phases namely: recording, classifying,
summarizing, and interpreting.
Recording. This is technically called bookkeeping. Some people confuse bookkeeping and
accounting as one and the same. However, bookkeeping is only a part of accounting – the
recording phase. In this phase, business transactions are recorded systematically and
chronologically in the proper accounting books. There are two kinds of bookkeeping: the
single entry bookkeeping and the double entry bookkeeping. Single entry bookkeeping does
not show the two-fold effects of business transactions. It shows only the debit or the credit of
each transaction. The double entry bookkeeping, however, reflects the two-fold effects of
business transactions. It has a debit and a credit.
Classifying. In this phase, items are sorted and grouped. Similar items are classified under
the same name. They may be classified as asset accounts, liability accounts, capital
accounts, revenue accounts and expense accounts. This classification is useful to the needs
of the management.
Summarizing. After each accounting period, data recorded are summarized through financial
statements. These reports are submitted to the management at the end of each accounting
period or as the need arise.
In accounting, the business is always assumed to be distinct and separate from its owner or
owners. Which means that the personal properties of the owner are different from the assets
of the business, the liabilities of the business are different from his personal obligations, and
the expenses incurred by the business are also different from his personal expenses? The
BUSINESS is an organization – from the largest and diversified corporation to a small sari-sari
store in the community – which engages in generating revenues through the manufacture
and/or sale of goods or rendering services with the goal of earning a profit.
A business assumes one of the three forms of organization. The accounting procedures
depend on which form the organization takes.
SOLE PROPRIETORSHIP. This business organization has a single owner called the
proprietor who generally is also the manager. Sole proprietorships tend to be small service-
type (e.g. physicians, lawyers and accountants) businesses and retail establishments. The
owner receives all profits, absorbs all losses and is solely responsible for all debts of the
business. From the accounting viewpoint, the sole proprietorship is distinct from its proprietor.
Thus, the accounting records of the sole proprietorship do not include the proprietor’s personal
financial records.
The forms of business organizations above are classified according to the ownership structure
of the business entity. Entities, however, can also be grouped by the types of goods or
services they offer. Any of these types of activities may be performed by a business
organization be it a sole proprietorship, a partnership or a corporation.
Merchandising companies purchased goods that are ready for sale and then sell these to
customers (e.g. car dealers, clothing stores and supermarkets).
Manufacturing companies buy raw materials, convert them into products and then sell the
products to other companies or to final customers (e.g. paper mills, steel mills, car
manufacturers and drug manufacturers).
Many types of decisions are made in business organizations. Accounting provides important
information to make these decisions. The three types of organizational activities are as
follows: financing, investing and operating.
FINANCING ACTIVITIES
Organizations require financial resources to obtain other resources used to produce goods and
services. They complete for these resources in financial markets. Financing activities are the
methods an organization uses to obtain financial resources from financial markets and how it
manages these resources. Primary sources of financing for most businesses are owners and
creditors, such as banks and suppliers. Repaying the creditors and paying a return to the
owners are also financing activities.
INVESTING ACTIVITIES
Managers use capital from financing activities to acquire other resources used in the
transformation process – that is, to transform resources from one form to a different from,
which is more valuable, to meet the needs of the people. Having the right mix of resources is
essential to efficient and effective operations.
An efficient business is one that provides goods and services at low costs relative to their
selling price. An effective business is one that is successful in providing goods and services
demanded by the customers.
Investing activities involve the selection and management including disposal and replacement
of long-term resources that will be used to develop, produce, and sell goods and services.
Investing activities include buying land, equipment, buildings and other resources that are
needed in the operation of the business, and selling these resources when they are no longer
needed.
CBLM on Develop by: Develop No.
Bookkeeping NCIII
Issued by:
Journalize Angelita O. Montero Page 12 of 76
Transactions
Date Developed :
November 20, 2014
OPERATING ACTIVITIES
Operating activities involve the use of resources to design, produce, distribute and market
goods and services. Operating activities include research and development, design and
engineering, purchasing, human resources, production, distribution, marketing and selling, and
servicing. Organizations compete in supplier and labor markets for resources used in these
activities. Also, they compete in product markets to sell the goods and services created by
operating activities.
1. Assets;
2. Liabilities; and
3. Owner’s Equity (or Capital).
ASSETS – are property or rights on property owned by the business. In other words, anything
of value owned by the business. Assets can be grouped into current assets and non-current
assets.
1. Current Assets refer to cash and other assets that are easily converted into cash or
consumed during the accounting period usually one year.
2. Non-current Assets are those assets not classified as current. They include, among
others, property, plant and equipment. Property, plant and equipment are tangible
assets used in the operation of the business, have useful life that exceeds beyond one
year, and are not intended for sale. Examples are land, building, equipment, furniture
and fixtures. Other non-current assets are long-term investment and intangible assets.
LIABILITIES – are debts of the business. These are obligations owed by the business. The
entity or person to whom the debt is owed is called a creditor. There are two classifications of
liabilities: current or short-term liabilities and long-term liabilities.
1. Current or short-term Liabilities are obligations or debts of the business which will be
paid during the accounting period by means of payment of current assets or a creation
2. Long-term Liabilities are obligations or debts of the business that will be due and
payable beyond one year. Examples are mortgage payable and notes payable due
beyond one year.
OWNER’S EQUITY – is a term that refers to the vested interest of the owner in the business.
The difference between the assets and the liabilities of the business is called owner’s equity or
owner’s capital.
The owner’s equity is partly contributed and partly earned. The initial investment of the
owner will be increased by the profit earned by the business.
The assets, liabilities and owner’s equity are always expressed in an equation:
Notice that the liabilities have preferential claims over the assets; hence, it is placed
before the owner’s equity in the accounting equation.
The two sides of the equation must always be equal because the assets are claimable
by someone. If there are no liabilities, then all the assets are claimable by the owner, and the
accounting equation is simply:
The accounting equation could be stated another way to emphasize the residual interest
of the owner over the assets of the business especially at the point of liquidation:
So far all possible transactions that may occur in a business are analyzed with the used
of the basic accounting equation. However, the use of basic accounting equation alone cannot
provide information about the profitability of the business. Fortunately, the same framework
1. Capital 3. Revenues
2. Withdrawals 4. Expenses
From the above equation, we may create another equation by expanding the owner’s
equity as follows:
Owner’s Equity
CAPITAL – This represents the equity or right of the owner for cash or other assets invested
or put into the business. This is used to present the amount of the beginning capital plus any
additional investments made by the owner.
WITHDRAWALS – The owner may need to withdraw cash or other assets taken from the
business for his personal needs that do not relate to the business. A withdrawal is a
subdivision of owner’s equity that records personal expenses outside the normal operations of
the business, as distinguished from business expenses which relates the business operations.
REVENUES – Revenue also known as income consists of assets received by an entity arising
from the sale of goods or the performance of services to the customers.
Each accounting element is composed of several accounts which describe the related
economic transactions and events. To maintain uniform account name, the business must
have a listing of all the accounts it uses to record economic transactions. The listing of all
accounts is called “Chart of Accounts.”
The chart of accounts is usually arranged in the financial statement order – that is, asset
accounts first, followed by liability accounts, owner’s equity, revenues and expenses accounts.
An example of chart of accounts could be listed as follows:
Account Account
Number Number
Assets (110-190) Liabilities (210-290)
Balance Sheet Accounts
The data that we record in the accounting books are called transactions. Transactions
are the economic activities of the firm. These activities could involve one enterprise and
another enterprise which is called external transaction or it maybe activities within the
enterprise which is called internal transaction. When there is a transaction there is an
exchange of value for value. In every transaction, there is always a value received and a
value parted with. These values received and parted with may either be money, property, or
services. This is the dual effect of business transaction which gave rise to the bookkeeping
system called Double Entry Bookkeeping. A transaction either increases or decreases the
assets, liabilities or owner’s equity but the equation or equilibrium among the elements should
always be maintained.
1. A lease contract was signed for use of an office space at a monthly rental of P8,000.
2. Tourist guides were hired by JB Travel & Tours for a salary of P6,000 each.
There are nine (9) possible types of transactions (or combination of two or more of
these types) which may occur in the basic accounting equation. Some of these nine types
may occur frequently, which some may be seldom. A summary of the nine possibilities may
appear in a tabular form as follows:
DESCRIPTION A = L + O.E.
FINANCIAL STATEMENTS
The worksheet provides all the details needed in preparing the financial statements. Although
the preparation of a worksheet is essential in the accounting process, it is not by itself a formal
financial statement. It should not be considered as a substitute for the formal financial
statements which are the end product of an accountant’s work in the accounting process.
INCOME STATEMENT
The Income Statement, sometimes called the Profit and Loss Statement, is a formal statement
which shows the revenues generated and the expenses incurred by the business covering a
specified period of time.
OST COMPANY
Income Statement
For the Month Ended _________
Aside from the Income Statement and the Balance Sheet, another formal financial statement is
to be prepared. A statement that shows the changes that take place in the owner’s equity
covering a period of time is called Statement of Changes in Owner’s Equity.
OST COMPANY
Statement of Changes in Owner’s Equity
For the Month Ended _________
The capital balance, beginning represents the capital balance at the end of the last accounting
period and carried over to the current period. If the business is in its first year of operations,
the initial investment is to be shown instead. Additional investments made by the owner as
well as the net income for the period are to be added to the beginning capital balance. Any
withdrawals made by the owner and the net loss (if such is the case) suffered by the business
are to be deducted from the total amount. The difference would the owner’s capital balance,
end of the period. The capital balance at the end figure is carried over to the owner’s equity
section of the balance sheet.
BALANCE SHEET
The balance sheet is a formal statement that shows the financial position of the company as of
a particular date. It is a listing that shows the assets owned, the liabilities owed, and the equity
of the owner of the business.
OST COMPANY
Balance Sheet
Date
ASSETS
Cash P xxxxx
Accounts Receivable xxxxx
Prepaid Rent xxxxx
Photocopying Equipment xxxxx
Total Assets P xxxxx
An investor makes investment in the hope of making profit. Not only must his
money be earning profit, but he also compares the profit earned by his business against
other investment alternatives. He considers likewise the risk involved in the investment.
A banker or creditor is concerned with the ability of the buyer to pay not only
the principal debt but also the interest. The accounting information helps him decide on
whether to extend credit, how much credit to extend, what the amortization period will
be and what interest rate will be applied.
A supplier most often offers his goods for cash or on credit terms depending on
the paying ability of the customer. He uses the accounting information to determine the
credit worth of his customer.
The government uses the accounting reports in several ways: as a tax collector,
it investigates tax returns as to the correct tax liability of a business; as a regulatory
body it verifies if the business is complying with the promulgated rules and regulations;
and as a customer before it awards the contract to build bridges or roads or flyovers to a
particular construction business it must first assess the company’s ability to deliver the
goods or services and be assured that there is no over profiteering from the contract, if
awarded.
Employees in their desire for higher wages, benefits, good working conditions
and security of tenure must first go over financial reports of the business in justifying for
their demands.
Even customers who have been informed that the price of a certain commodity
has increased would continue patronizing the business only if the price is fair and the
product is worth the money they paid for it. The fairness of the price could be
determined from the financial reports
CBLM on Develop by: Develop No.
Bookkeeping NCIII
Journalizing
Issued by:
Rolly Polly Page 22 of 76
Transactions
Date Developed :
November 20, 2014
SELF CHECK LO1-1
______ 5. Both sides of the fundamental accounting equation must always be equal.
______ 6. The entity concept states that the transactions of different entities should be
accounted for together.
______ 10. In the fundamental accounting equation, assets are added to liabilities.
Date Developed :
November 20, 2014
ANSWER KEY LO1-1
1. T
2. T
3. F
4. T
5. T
6. F
7. T
8. T
9. T
10. F
Date Developed :
November 20, 2014
SELF CHECK LO1-2
A L OE
Required:
For each transaction, indicate whether the assets (A), liabilities (L), or owner’s equity
(OE) increased (+), decreased (-) or did not change (0) by placing the appropriate sign
the appropriate column.
Date Developed :
November 20, 2014
ANSWER KEY LO1-2
A L OE
Required:
For each transaction, indicate whether the assets (A), liabilities (L), or owner’s equity
(OE) increased (+), decreased (-) or did not change (0) by placing the appropriate sign
the appropriate column.
Date Developed :
November 20, 2014
WORKSHEET LO1-1
Recording transactions in a financial transaction worksheet
INSTRUCTION: Indicate the effect of each transaction below using the balance sheet
equation:
The following selected transactions were completed by Roberto Orca Delivery Service
during July 2012:
2.
3.
4.
5.
6.
7.
8.
9.
10.
TOTAL
Date Developed :
November 20, 2014
WORK SHEET LO1-1
INTRUCTION:
1. Write at least ten (10) typical business transactions for a video rental business.
2. Analyze each transaction and write the accounts affected.
3. Prepare the chart of accounts for a video rental business.
TRANSACTIONS
CHART OF ACCOUNTS
Date Developed :
November 20, 2014
QUALIFICATION : BOOKKEEPING NC II
UNIT OF COMPETENCY : JOURNALIZE TRANSACTIONS
ASSESSMENT CRITERIA:
RESOURCES:
Paper
Learning Materials
Pen
Sample Business Documents
REFERENCES:
Date Developed :
November 20, 2014
Learning Outcome #2: Analyze Documents
SPECIAL INSTRUCTIONS
LEARNING ACTIVITIES
2. Answer Self-Check for 1.2-1 Compare answers with the answer key.
You are required to get all answers
correct. If not, read the information
sheets again to answer all questions
correctly.
Date Developed :
November 20, 2014
INFORMATION SHEET LO2-1
Analyze Documents
SOURCE DOCUMENTS
are the forms, evidences or legal/official papers that serve as supports to the
underlying economic transactions. These evidential matters support the
objectivity of accounting records.
The following are some examples of common business forms and documents wherein
the business activities of the enterprise are written:
Date Developed :
November 20, 2014
INVOICE – is issued when service or merchandise is given to a customer or client.
Date Developed :
November 20, 2014
CHECK VOUCHER – is a document that serves to recognize a liability and authorize
the disbursement or cash.
CHECK – is issued when payment is made from the cash deposited in the bank.
Date Developed :
November 20, 2014
PROMISSORY NOTE – is a written promise made by the maker to pay the payee
(creditor) a sum certain in money at a fixed or determinable future time.
Date Developed :
November 20, 2014
PAYROLL SHEET – is a written list of salaries to be paid, with the amounts due. The
aggregate of these amounts are the money to be disbursed.
Date Developed :
November 20, 2014
CBLM on Develop by: Develop No.
Bookkeeping NCIII
Journalizing
Issued by:
Rolly Polly Page 36 of 76
Transactions
Date Developed :
November 20, 2014
ACCOUNT TITLES
ASSETS:
Current Assets
Cash on Hand – refers to cash and other cash items which are not yet deposited in the
bank. It includes coins, currencies, check, money orders, and other money equivalents.
Notes Receivable – Amounts collectible from customers for goods sold and services
rendered on credit or from others for loans granted. Such claims are evidenced by a
promissory note.
Accounts Receivable – Claims from customers arising from goods sold or services
rendered on credit. It represents the debtor’s oral promises to pay.
Merchandise Inventory – refers to goods unsold at the end of the accounting period or
on hand at the beginning of the year.
Prepaid Expenses – are expenses paid in advance or items that are bought which will
be used during the accounting period. Examples are: Supplies, Prepaid Insurance,
Prepaid Rent. Other terms used for supplies are Prepaid Supplies, Supplies on
Hand, Unused Supplies or Supplies Inventory.
Date Developed :
November 20, 2014
Non-Current Assets
Land – Land owned by the business used for building sites and other business
purposes.
Furniture and Fixtures – It includes tables, chairs, showcases, counters, cabinets and
other pieces of furniture owned and used by the business in its operation.
Vehicles – includes cars, jeeps, trucks, vans, and other transportation vehicles owned
by the business.
Intangible Assets – are assets that do not have physical existence owned by the
business. Examples are Goodwill, Patents, and Trademarks.
LIABILITIES:
Current Liabilities
Accounts Payable – Amounts due to creditors for the goods or services bought on
credit.
Date Developed :
November 20, 2014
Notes Payable – Amounts due to the creditors which are supported by a promissory
note. It is a current liability if the note is payable within a year. If the note is payable
beyond one year, it is classified as a long-term liability.
Accrued Liabilities – Amounts owed to others for unpaid expenses. These are debts
that have accumulated because of the passage of time but that are not yet due for
payment as at the balance sheet date. Typical examples of accrued liabilities are:
Salaries Payable – Amounts due to the employees for services they have
rendered.
Taxes Payable – are taxes due for the government not yet paid by the business.
Other examples of expenses not yet paid by the business are Rent Payable,
Utilities Payable, and many others.
goods or services.
Long-term Liabilities
OWNER’S EQUITY:
Owner’s Capital – used to record the amount the owner of the business entity has
invested in the entity. This account is ultimately reduced by cash or other assets that
the owner may withdraw from the business. This account is increased by the amount of
net income earned during the year and is decreased by a net loss. This account title
bears the name of the owner.
Date Developed :
November 20, 2014
Owner’s Drawing – is a term that shows the withdrawal of cash or other items from the
business by the owner.
INCOME (a.k.a. REVENUE): is a general term to mean any earning made by the
business.
EXPENSES:
Taxes and Licenses Expense – are payments made by the business to the
government for its business operations like privilege taxes, percentage taxes, mayor’s
permit, and others.
Salaries Expense (or Wages Expense) – refers to the cost of services rendered by the
employees or workers of the business.
Bad Debts Expense – refers to that portion of accounts receivable which may not be
collected.
Date Developed :
November 20, 2014
Rent Expense – refers to the space occupied by the business or the payment for the
use of any property by the business.
Interest Expense – refers to the amount charged for the use of money.
Repairs and Maintenance Expense – Expenses incurred for repairing the assets of
the business.
Date Developed :
November 20, 2014
SELF CHECK LO2-1
Instruction: Fill in the blanks. Write the answer on the space provided.
___________ 1. This document is a written promise made by the maker to pay the
payee (creditor) a sum certain in money at a fixed or determinable
future time.
___________ 2. This document is a written list of salaries to be paid, with the amounts
due. The aggregate of these amounts are the money to be
disbursed.
___________ 5. Refers to cash and other cash items which are not yet deposited in the
bank. It includes coins, currencies, check, money orders, and other
money equivalents.
Date Developed :
November 20, 2014
ANSWER KEY LO2-1
1. Promissory note
2. Payroll sheet
4. Mortgage payable
5. Cash
Date Developed :
November 20, 2014
WORK SHEET LO2-1
INSTRUCTION:
Several transactions of Hanson Pool Service are described below. Indicate the type
of source document that is likely to contain the details of each transaction.
3. Purchased a new generator for use in the business, paying P550 cash.
5. Billed customers for pool services performed during the past week, P2,300.
Date Developed :
November 20, 2014
QUALIFICATION : BOOKKEEPING NC III
UNIT OF COMPETENCY : JOURNALIZE TRANSACTIONS
ASSESSMENT CRITERIA:
2. Debit and credit account titles are determined in accordance with chart of
accounts.
RESOURCES:
Calculator
Journal Paper
CBLM on Develop by: Develop No.
Bookkeeping NCIII
Journalizing
Issued by:
Rolly Polly Page 45 of 76
Transactions
Date Developed :
November 20, 2014
Learning Materials
Pencil
Eraser
Philippine Financial Reporting Standards
REFERENCES:
Date Developed :
November 20, 2014
Learning Outcome #3: Prepare Journal Entry
SPECIAL INSTRUCTIONS
LEARNING ACTIVITIES
2. Answer Self-Check for 1.3-1 Compare answers with the answer key.
You are required to get all answers
correct. If not, read the information
sheets again to answer all questions
correctly.
Date Developed :
November 20, 2014
INFORMATION SHEET LO3-1
ENTITY CONCEPT. The most basic concept in accounting is the entity concept. An
accounting entity is an organization or a section of an organization that stands apart
from other organizations and individuals as a separate economic unit. Simply put, the
transactions of different entities should not be accounted for together. Each entity
should be evaluated separately.
Accounting practices follow certain guidelines. The set of guidelines and procedures
that constitute acceptable accounting practice at a given time is GAAP, which stands for
generally accepted accounting principles. In order to generate information that is
useful to the users of financial statements, accountants rely upon the following
principles:
Date Developed :
November 20, 2014
OBJECTIVITY PRINCIPLE. Accounting records and statements are based on the most
reliable data available so that they will be as accurate and as useful possible. Reliable
data are verifiable when they can be confirmed by independent observers. Ideally,
accounting records are based on information that flows from activities documented by
objective evidence. Without this principle, accounting records would be based on
whims and opinions and is therefore subject to disputes.
HISTORICAL COST. This principle states that acquired assets should be recorded at
their actual cost and not at what management thinks they are worth as at reporting
date.
ADEQUATE DISCLOSURE. Requires that all relevant information that would affect
the user’s understanding and assessment of the accounting entity be disclosed in the
financial statements.
CONSISTENCY PRINCIPLE. The firms should use the same accounting method from
period to period to achieve comparability over time within a single enterprise. However,
changes are permitted if justifiable and disclosed in the financial statements.
Date Developed :
November 20, 2014
BUSINESS AS AN ACCOUNTING ENTITY
In accounting, the business is always assumed to be distinct and separate from its
owner or owners. Which means that the personal properties of the owner are different
from the assets of the business, the liabilities of the business are different from his
personal obligations, and the expenses incurred by the business are also different from
his personal expenses? The transactions therefore, entered into by the owner in behalf
of the business should be recorded in the books of the firm.
1. Transaction analysis
2. Journalizing transactions
3. Posting the accounts
4. Preparation of the Trial Balance
5. Adjusting the entries
6. Preparation of the worksheet
7. Preparation of the financial statement
8. Closing the entries
9. Preparation of the Post-closing trial balance
Date Developed :
November 20, 2014
DEBIT AND CREDIT
Debit is the value received in a business transaction which must be recorded in the
journal. This word is derived from a Latin word for borrower, “debitum” (a debtor). The
place of debit in the equation is on the left-hand side. The word “charge” in accounting
would also mean debit.
Credit (Lat. Creditum, “a creditor”) is the value parted with in a business transaction,
which must be recorded in the journal. The place of credit in the equation is on the
right-hand side.
The rules of debit and credit are based on the normal balance of an accounting
element or account. The term “normal balance of account” refers to the usual position
of an account in the T-account.
Asset accounts are normally in the debit balance while the liability and owner’s
equity accounts are normally in the credit balance.
The normal balance of an account provides the basis in analyzing when to debit
and credit an account. The following rules must be observed when to debit or credit an
asset, liability and capital accounts.
Date Developed :
November 20, 2014
Owner’s Equity Credit to increase the capital account.
Debit to decrease its amount.
THE T-ACCOUNT
The simplest form of an account called the T-Account has two sides: one side is
for recording increases and the other side is for recording decreases. At the center of
the T account is the title of the item. To illustrate:
Cash
Date Developed :
November 20, 2014
When an amount is to be recorded on the left side, we simply say debit the
account, and when it is to be recorded on the right side, we say credit the account.
Debit is an accounting term which simply means left side of an account, while credit
simply means right side of an account. What happens when the amount is placed on
the left side or on the right side of an account? Some accounts are increased on the
debit side, others on the credit side based on the accounting equation:
Since the assets are on the left side or debit side, increases are therefore on the
debit side and decreases are on the credit side. Since liabilities and owner’s equity are
on the right side or credit side, increases therefore are on the credit side and decreases
are on the debit side. Thus:
+ - - + - +
Date Developed :
November 20, 2014
JOURNALIZING
Journalizing is the first step in the accounting cycle. It is the process of recording
business transactions in a journal.
A journal is a book of accounts wherein business transactions are recorded for the
first time. It is also called the book of original entry. There are two kinds of journal – the
general journal and the special journals. Cash receipts journal, cash payments journal,
sales journal, purchases journal, and some other forms of combination journals are
special journals. The type of journal to be used depends on the size and need of the
business.
General journal is the simplest form of journal wherein the two-column form may be
used.
Illustration:
Date – the date of the transaction is entered in this column; transactions are recorded in
a systematic manner and in a chronological order.
Date Developed :
November 20, 2014
Account Titles and Explanation – this column contains the debit and credit accounts
and a brief explanation of the entries.
Folio – this contains the post reference number or the ledger page in which the
accounts are transferred.
Procedures in Journalizing:
Date Developed :
November 20, 2014
E. Under the folio column
1. The folio or reference column is used to indicate the page number of the
ledger in which the entry is transferred.
There is no entry yet in the folio column when transactions are recorded in the
general journal. However, when the entries are copied from the journal to the ledger,
the account number of the ledger accounts in which the debits and credits are copied
are entered in the folio column.
A Journal entry is a record of business transactions in the journal. There are two
types of journal entry: the simple journal entry which contains only one debit and one
credit accounts, and the compound journal entry which contains either one debit and
two or more credits; or two or more debits and one credit; or two or more debits and two
or more credits.
1. To provide in one place a complete record of each transaction. Such will link
together the debits and credits of the transactions.
2. The records make it possible to trace the debits and credits of the accounts when
errors are committed.
Bookkeeping techniques
When recording transactions in the journal or ledger, commas and periods are no
longer written because the rules lines in the forms accomplished this purpose. Each
column represents a digit as follows:
Date Developed :
November 20, 2014
ten-thousands tens digits
hundred thousands ones digits
peso sign centavos
However, when reports are prepared in unruled paper, commas and periods are
necessary.
Dash instead of zeros may be used in writing centavos because it is easier to write than
two zeros. This, however, is optional on the part of the bookkeeper. When preparing
reports, however, two zeros are preferred because they are neater in appearance.
Date Developed :
November 20, 2014
Instruction: Indicate whether the sentence or statement is TRUE or FALSE.
_________ 1. The top of the T-Account is used for account titles. Credits are entered
on the left side of the T-account; debits, on the right.
_________ 3. The payment of liability is recorded by a debit to the liability account and
a credit to the owner’s capital account.
_________ 4. The difference between the debit and credit amounts in an account is the
account balance.
_________ 5. An asset account appears on the right side of the accounting equations
and is also increased on the right side of its T-account.
Date Developed :
November 20, 2014
1. False
2. False
3. False
4. True
5. False
WORKSHEET LO3-1
Date Developed :
November 20, 2014
Listed below are several account titles, each identified by a letter. Following the list of
accounts is a series of business transactions. Indicate the account to be debited and the
account to be credited for each transaction.
1. Melanie Nelson deposited P15,000 in cash from personal funds into the business
checking account.
3. Melanie Nelson bought a computer for the business on credit from Modern
Equipment, Inc., for P1,599.
5. Issued a check for P800 to Modern Equipment, Inc., as half payment for the
computer.
8. Received a P65 check from Hector Ramirez, CPA, for office supplies purchased
earlier.
WORKSHEET LO3-2
Date Developed :
November 20, 2014
INSTRUCTION: Analyze and journalize the following transactions. Use journal paper.
Pat Kwok owns and operates Kwok's Word Processing Service. The accounts
used for recording and reporting business transactions are:
Pat completed these transactions during the first month of operation on July 2012.
Date Developed :
November 20, 2014
Performance Objective: Record business transactions in the journal with carefulness and
accuracy.
Tools: Calculator
Steps/Procedure:
The following selected transactions were completed by Arthur’s Machine Works during the month of
February, 2012:
1 – M. Arthur made an investment in cash P20,000 and Furniture, P10,000 to start his business.
3 – Purchases supplies for cash P500.
5 – Purchased equipment on account for P15,000 from Sanyo.
10 – Received from customers cash P4,200 for machine work done.
12 – Paid Gas and Oil, P1,500.
15 – Paid 50% of its account due to Sanyo.
18 – Billed customer for machine work done, P8,500.
20 – Arthur made a
cash withdrawal for personal use, P500.
21 – Collected P4,200 from customers who were billed in Feb. 18.
22 – Accounts payable to Sanyo is due. Issued a note promising to pay after 5 days.
25 – Paid the Meralco bill for electricity used up, P1,000.
27 – The note in Feb. 22 was paid from the personal cash of the owner.
28 – All the supplies were used up.
Account Titles:
Cash; Accounts Receivable; Supplies; Furniture and Fixtures; Equipment; Accounts Payable; Notes
Payable; Arthur, Capital; Arthur, Drawing; Service Income; Gasoline Expense; Utilities Expense;
and Supplies Expense
Date Developed :
November 20, 2014
Performance Criteria Checklist for
Job Sheet 1.1-1
Journalizing Transactions
CRITERIA YES NO
Date Developed :
November 20, 2014
1. Prepare journals in accordance with industry
practice and generally accepted accounting
principles/Philippine Financial Reporting
Standards for transactions and events.
Comments / Suggestions:
_______________________________________________
______________________________________________________________________
_
______________________________________________________________________
Date Developed :
November 20, 2014
Evidence Plan
Competency
Bookkeeping NCIII
standard:
Unit of
Journalize Transactions
competency:
Oral Questioning
performance test
Written Test
Practical/
Date Developed :
November 20, 2014
Prepare journals in accordance with industry practice
and generally accepted accounting
principles/Philippine Financial Reporting Standards for
transactions and events.
Prepared Date:
by:
Checked Date:
by:
Date Developed :
November 20, 2014
BOOKKEEPING NCIII
Journalize Transactions
WRITTEN TEST
Date Developed :
November 20, 2014
(1) Determine which accounts are debited and credited, and place the letter assigned
to those accounts in the Acct. Title columns.
(2) Indicate the account classification by placing A for asset, L for liability, OE for
owner's equity, R for revenue, and E for expense in the Acct. Class. columns.
(3) Indicate whether the account is to be increased or decreased by placing a plus sign
(+) for increase and a minus sign (-) for decrease in the Incr./Decr. columns.
Transactions:
TEST II: Below is a partial listing of the accounts used by Macy Landscaping. Record
the following business transactions on page 2 of the general journal using the current
year.
Date Developed :
November 20, 2014
Cash in Bank Bill Macy, Capital Rent Expense
Accounts Receivable—Peggy Dunne Bill Macy, Withdrawals Supplies Expense
Supplies Fees
Transactions:
GENERAL JOURNAL
DATE PARTICULARS P/R DEBIT CREDIT
Date Developed :
November 20, 2014
BOOKKEEPING NCIII
Journalize Transactions
PRACTICAL TEST
Miss Snooky Von opened a nursery school called “Rainbow Nursery School”.
The following transactions took place in the first month of the business
operations:
June, 2010
Date Developed :
November 20, 2014
15 – Paid the wages of the nursery helper, P2,500.
18 – Collected P3,000 form P. Paloma as partial settlement of her account.
20 – Received P10,500 from various customers.
25 – Paid the utility bills for the month, P1,800.
26 – Purchased additional nursery supplies for cash, P15,000.
28 – Withdrew P5,000 for personal use.
30 – Paid the wages of the nursery helper, P2,500.
ACCOUNT TITLES:
Cash, Accounts Receivable, Nursery Supplies, Furniture and Fixtures, Play Equipment,
Accounts Payable, Von Capital, Von Drawing, Fees Income, Advertising Expense, Rent
Expense, Wages Expense and Utilities Expense.
INSTRUCTIONS:
This post-training evaluation instrument is intended to measure how satisfactorily
your trainer has done his job during the whole duration of your training. Please give your
honest rating by checking on the corresponding. Your answers will be treated with
utmost confidentiality.
Date Developed :
November 20, 2014
CBLM and the evaluation system
Discusses clearly the unit of competencies
and outcomes to be attained at the start of
every module
Date Developed :
November 20, 2014
Attends classes regularly and promptly
1 2 3 4 5
Workshop layout conforms with the
components of a CBT workshop
Number of CBLM is sufficient
Date Developed :
November 20, 2014
presented
Information Sheet are
comprehensive in providing the
required knowledge
Provide relevant examples,
illustrations and demonstrations.
Sufficiency exercises, like Task/Job
Sheets are sufficient to learn
required skills
Appropriate knowledge are learned
through the contents of the course
Training Methodologies are
effective
Assessment Methods and
evaluation system are suitable for
the trainees and the subject matter
Recording of achievements and
competencies acquired is prompt
and comprehensive
Feedback about the performance of
learners are given immediately
Date Developed :
November 20, 2014
Equipment, Supplies, and
Materials are Sufficient
1 2 3 4 5
Support Staff are accommodating
Date Developed :
November 20, 2014
CBLM on Develop by: Develop No.
Bookkeeping NCIII
Journalizing
Issued by:
Rolly Polly Page 76 of 76
Transactions
Date Developed :
November 20, 2014