Basic Bookkeeping

BASIC
BOOKKEEPING
TRAINING
Course Content
1. Introduction to Basic Accounting
1.1 Definition and Functions of Accounting
1.2 Basic Elements of Accounting
1.3 Theory of Debit and Credit
1.4 Accounting Equation
1.5 Chart of Accounts
1.6 Accounting Periods
1.7 Accounting Methods
2. Bookkeeping
2.1 Definition and Importance of Bookkeeping
2.2 Book of Accounts
2.2.1 General Ledger
2.2.2 Subsidiary Ledger
2.2.3 Journal
2.3 Documents
2.3.1 Receipts
2.3.2 Abstract of Collection
2.3.3 Cash/Check/Petty Cash Voucher
2.4 Proofsheet
3. Accounting Cycle
3.1 Journalizing
3.2 Posting
3.3 T-accounts
3.4 Preparation of Trial Balance
3.5 Adjusting Entry
3.6 Preparation of Financial Statements
3.7 Closing and Reversing Entries
What is Accounting?
Is the art of recording, classifying and

summarizing in the significant manner and in
terms of money, transactions and events which
are, in part at least of a financial character and
interpreting the results thereof.
Functions of Accounting
1. Recording
2. Classifying
3. Summarizing
4. Interpreting
Basic Elements of Accounting
•ASSETS
•LIABILITIES
•CAPITAL OR OWNER’S EQUITY
•INCOME
•EXPENSES
Wonder Moms
It was Saturday morning, supposed to be a rest day yet Mrs. S is still
busy doing some office works. She was so annoyed because she has still
too much laundry to do. She’s so tired for the whole day and wasn’t
able to do the laundry, while she was already in her bed something
came to her mind, “Aha!” She is said, “in this modern day women like
me are already busy working like men do,” she added, “why not take
advantage of this opportunity and establish a business, I will open a
laundry shop so that those working moms like me have somewhere to
run to do their laundry”, she continued.
The next morning, Mrs. Smith visited her friend Mrs. Molly and tell
her about the plan of putting up a laundry shop. Mrs. Molly liked the
idea and agreed to be her partner. The two then processed the
necessary documents for the shop, and purchase washing machines
and other stuff needed for the shop.
Since Mrs. Smith and Mrs. Molly are both working they decided to a
hire one tenant to attend the shop. And the laundry shop started
operating. Day by day the customers are increasing and the amount of
sales from the laundry shop is reasonable.
The business is doing well. At the end of the month Mrs. Smith and
Mrs. Molly paid for their tenant’s salary, so do the water and electric
bill.
It was indeed a smooth venture for the laundry shop.
A few months later, Mrs. Smith and Mrs. Molly decided to expand
the business and wants to purchase few more units of washing
machine, unfortunately they don’t have enough cash. The two were so
sad.
The next morning, while going to the office Mrs. Smith pass by a
bank. Chadaannnn! She got an idea. She immediately called Mrs. Molly
and tell her the idea of availing loan from the bank so that they can get
money for their shop’s expansion. Mrs. Molly agreed with it.
The two then, visited the bank to avail a loan. A few days later their
loan has been approved and the two busy mothers happily
purchased the additional washing machine for their shop’s expansion.
Assets
o washing machine and other stuff
Liability
o loan from the bank
Owner’s Equity
o Mrs. Smith and Mrs. Molly’ s Capital
Income
o Sales from the laundry shop
Expenses
o processing of necessary documents
o tenant’s salary
o water and electric bill
Assets
Are properties or rights or property owned by the
business. In other words, anything of value owned by the
business.
Examples:
Money, land, building, machines, equipment, furniture
and fixtures.
o Current Assets
refers to cash and other assets that are easily converted into cash or consumed during
the accounting period usually one year.
Examples of Current Assets

o Cash on Hand
o Cash in Bank
o Notes Receivables
o Interest Receivables
o Accounts Receivable
o Advances to Employees
o Office Supplies
o Merchandise Inventory
o Prepaid Rent
o Prepaid Interest
o Non – current Assets
are those benefits are expected to last for more than one year.
Examples of Non – current Assets:

o Land
o Buildings
o Accumulated Depreciation – Building
o Furniture and Fixtures
o Accumulated Depreciation – Furniture and Fixtures
o Office Equipment
Liabilities
Refers to the obligations of the company or organization. Amount
owed to lenders and suppliers. Liabilities often have the word
“Payable” in the account title.
Examples :
o Accounts Payable
o Notes Payable
o Salaries Payable
o Insurance Premium Payable
o Bonds Payable
• Current 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 of another current liability. Examples are short - term notes
payable, accounts payable, insurance premium payable and salaries
payable.
• Non – current Liabilities

are obligations or debts of the business that will due and payable
beyond one year. Examples are Long – term notes payables, mortgage
payable and bonds payable.
Capital or Owner’s Equity
is a term that refers to the vested interest of the owner in the
business
o Owner’s Drawing – is a term that shows the withdrawal of cash or

other items from the business by the owner. This is deducted from
the income earned by the business.
o Income and Expense Summary – is a temporary account opened at

the end of the accounting period to absorb income and expense
accounts before finally closing it to capital.
Income
• Is a general term to mean any earnings made by the business.
Examples:
o Sales
o Service Income
o Interest income
o Commission Income
o Rent Income
Expenses
Is the money spent or cost incurred in an entity’s effort to generate revenue.
Examples:
o Salaries Expense
o Rent Expense
o Advertising Expense
o Taxes and Licenses
o Repairs Expense
o Supplies Expense
o Depreciation Expense
o Bad Debt Expense
o Freight Out
Play Time
☺
Sample Business Transactions
YAMABE AIRLINES was registered with the Department of Trade and Industry as a
single proprietorship by C. YAMABE, the owner.
o April 1, 2016, the business was registered with Department of Trade and Industry.
Catherine Yamabe invested P100,000.00
Owner’s Equity
o April 2, 2016, bought computer equipment for P10,000 cash
Assets
o April 3, 2016, bought office supplies on cash basis for P700
Assets
o April 4, 2016, borrowed money from RCBC Bank amounted to P50,000
Liability
• April 5, 2016, sold merchandise for P10,000
Income
• April 6, 2016, paid office rent for P5,000
Expense
• April 7, 2016, paid electric and water bill
Expense
• April 8, 2016, sold merchandise on account for P5,000
Income
• April 8, 2016, purchase merchandise on account for P20,000
Liability
• April 9, 2018, C. Yamabe got cash from the business, P12,000
Owner’s Equity
• April 9, 2016, sold merchandise on cash basis, P1,500 and on credit
for P3,000
Income
• April 10, 2016, C. Yamabe put up additional P10,000 for the business
Owner’s Equity
• April 15, 2016, paid employee salary for P3,000
Expense
• April 16, 2016, purchase merchandise for P5,000
Assets
• April 17, 2016, paid office rent in advance for P5,000
Assets
The Theory of Debit and Credit
❖ Assets – debit to increase, credit to decrease
❖ Liabilities – debit to decrease, credit to increase
❖ Owner’s equity – debit to decrease, credit to increase
❖ Income – debit to decrease, credit to increase
❖ Expenses – debit to increase, credit to decrease
Examples:
TRANSACTIONS DEBIT CREDIT
(VALUE RECEIVED) (VALUE GIVEN)
1. BOUGHT COMPUTER COMPUTER (OFFICE CASH

EQUIPMENT)
2. PAID SALARIES SALARIES EXPENSE CASH
3. RENDERED SERVICE CASH SERVICE INCOME
4. SOLD SUPPLIES •CASH •SALES INCOME

•COGS •MDSE INVENTORY
5. MISS. REYES INVESTED IN CASH REYES, CAPITAL

THE BUSINESS
Exercise 1:
Using the following account titles, determine what is the debit/credit in every
transactions for Reynaldo Casas for the month of May 2016.
oMay 1 – Dr. Reynaldo Casas invested cash of Php10,000

oMay 3 – bought medical supplies for cash, Php500
oMay 5 – bought office tables and chairs for cash, Php1,500
oMay 6 – received Php3,000 for medical service rendered
oMay 10 – billed Mr. Castro, Php1000, for services rendered
oMay 15 – paid salaries of attendants, Php1,500
oMay 24 – Casas, withdrew, Php500
oMay 25 – paid advertising expense, Php350
oMay 27 – collected the account of Mr. Castro
oMay 30 – paid salaries of attendant, Php1,500
DATE DEBIT CREDIT
MAY 1 CASH ON HAND CASAS, CAPITAL
(PHP1,000) (PHP1,000)
MAY 3 SUPPLIES EXPENSE CASH ON HAND
(PHP500) (PHP500)
MAY 5 OFFICE FURNITURE CASH ON HAND
(PHP1,500) (PHP1,500)
MAY 6 CASH ON HAND MEDICAL FEES (PHP3,000)
(PHP3,000)
MAY ACCOUNTS RECEIVABLE MEDICAL FEES (PHP1,000)
10 (PHP1,000)
DATE DEBIT CREDIT
MAY 15 SALARY EXPENSE CASH ON HAND
(PHP1,500) (PHP1,500)
MAY 24 CASAS, DRAWING (PHP500) CASH ON HAND
(PHP500)
MAY 25 ADVERTISING EXPENSE CASH ON HAND
(PHP350) (PHP350)
MAY 27 CASH ON HAND (PHP1,000) ACCOUNTS
RECEIVABLE
(PHP1,000
MAY 30 SALARY EXPENSE (1,500) CASH ON HAND
(PHP1,500)
Assignment: Determine the debit and credit of each transactions
YAMABE AIRLINES was registered with the Department of Trade and
Industry as a single proprietorship by C. YAMABE, the owner.
o April 1, 2016, the business was registered with Department of Trade

and Industry. Catherine Yamabe invested P100,000.00
o April 2, 2016, bought computer equipment for P10,000 cash
o April 3, 2016, bought office supplies on cash basis for P700
o April 4, 2016, borrowed money from RCBC Bank amounted to P50,000
o April 5, 2016, sold merchandise for P10,000
o April 6, 2016, paid office rent for P5,000
o April 7, 2016, paid electric and water bill
o April 8, 2016, sold merchandise on account for P5,000
o April 8, 2016, purchase merchandise on account for P20,000
o April 9, 2018, C. Yamabe got cash from the business, P12,000
o April 9, 2016, sold merchandise on cash basis, P1,500 and on credit for
P3,000
o April 10, 2016, C. Yamabe put up additional P10,000 for the business
o April 15, 2016, paid employee salary for P3,000
o April 16, 2016, purchase merchandise for P5,000
o April 17, 2016, paid office rent in advance for P5,000
Accounting Element Normal Balance To Increase To Decrease
1. Assets Debit Debit Credit
2. Liabilities Credit Credit Debit
3. Capital Credit Credit Debit
4. Withdrawal Debit Debit Credit
5. Income Credit Credit Debit
6. Expense Debit Debit Credit
CHART OF ACCOUNTS
A CHART OF ACCOUNTS IS A LIST OF ACCOUNTS TITLES

USED AS A GUIDE IN RECORDING BUSINESS
TRANSACTIONS. ASSETS, LIABILITIES, OWNER’S EQUITY,
INCOME AND EXPENSES ARE LISTED DOWN TO HELP IN
RECORDING A PARTICULAR TRANSACTION.
Chart of Accounts – Service Business
100 Assets
Current Assets Non - current Assets
101 Cash on Hand 120 Land
102 Cash in Bank 121 Buildings
103 Notes Receivables 121.1 Accumulated Depreciation - Building
104 Interest Receivables 122 Furniture and Fixtures
105 Accounts Receivables Accumulated Depreciation - Furniture
106 Advances to Employees 122.1 and Fixtures
107 Office Supplies 123 Office Equipment
109 Prepaid Insurance
110 Prepaid Rent
111 Prepaid Interest
200 Liabilities 400 Income
Current Liabilities 401 Service Income
201 Accounts Payable 402 Interest Income
404 Rent Income
SSS and Philhealth Premium
601 Income Summary
204 Payable
500 Expenses
205 Withholding Tax Payable 501 Salaries Expense
206 Unearned Interest Income 502 Rent Expense
Non - current Liabilities 503 Advertising Expense
210 Long -term Notes Payable 504 Taxes and Licenses
211 Mortgage Payable 505 Repairs Expenses
212 Bond Payable 506 Office Supplies
300 Owner's Equity 507 Depreciation Expense
508 Bad Debt Expense
301 Capital
509 Utilities Expense
302 Drawings
303 Income and Expense Summary 510 Expense
511 Representation Expense
512 Miscellaneous Expense
Chart of Accounts – Merchandising Business
100 Assets
Current Assets Non - current Assets
101 Cash on Hand 120 Land
102 Cash in Bank 121 Buildings
105 Accounts Receivables 121.1 Accumulated Depreciation - Building
105.1 Estimated Uncollectible Accounts
122 Furniture and Fixtures
106 Advances to Employees
107 Office Supplies
Accumulated Depreciation - Furniture
109 Prepaid Insurance 122.1 and Fixtures
110 Prepaid Rent 123 Office Equipment
111 Prepaid Interest
200 Liabilities 400 Income
Current Liabilities 401 Sales
201 Accounts Payable 405 Sales Returns and Allowances
204 SSS and Philhealth Premium 403 Sales Discounts
205 Withholding Tax Payable 500 Expenses
Non - current Liabilities 501 Cost of Goods Sold/Purchases
210 Long -term Notes Payable 502 Rent Expense
211 Mortgage Payable 503 Advertising Expense
212 Bond Payable 504 Taxes and Licenses
300 Owner's Equity 505 Repairs Expenses
301 Capital 506 Office Supplies
302 Drawings 507 Depreciation Expense
303 Income and Expense Summary 508 Freight - out
509 Utilities Expense
510 Expense
511 Representation Expense
512 Miscellaneous Expense
ACCOUNTING PERIOD
• CALENDAR YEAR OR PERIOD

A PART OF 12 MONTHS STARTING JANUARY 1 AND ENDING
DECEMBER 31.
• FISCAL YEAR
ANY SUCCESSION OF 12 MONTHS STARTING WITH ANY MONTH
EXCEPT JANUARY 1 AND ENDING IN ANY MONTH EXCEPT DECEMBER
31.
ACCOUNTING METHODS
• CASH METHOD
INCOME IS RECORDED WHEN CASH IS RECEIVED & EXPENSES ARE
CONSIDERED INCURRED ONLY WHEN PAID CASH.
• ACCRUAL ACCOUNTING
INCOME IS RECORDED WHEN GOODS ARE DELIVERED OR SERVICES
ARE RENDERED WHETHER PAID IN CASH OR NOT, AND EXPENSES ARE
RECORDED AT THE TIME THEY ARE INCURRED EVEN IF NOT YET PAID.
Play Time ☺
• Electric and water bill payment are expenses
True
• Land is a current asset
false, non – current assets
• Merchandise inventory is held for sale
True
• Prepaid rent is a current asset
True
• Building depreciates in time
True
• Owner’s Equity refers to the vested interest of the owner in the business
true
Freight – out is a liability
false, expense
Assets are credited when increase
false, debited
Income is debited when decrease
true
Expenses are credited when increase
false, debited
Liabilities are debited when decrease
True
Cash is debited when increase
true
Notes Payable refers to the loan availed by the business to banks and other
financial institutions
True
Cash is a non-current asset
false, current asset
Merchandise Inventories are debited upon purchase
true
Building is a non – current asset
True
Owner’s Equity is debited when increase
False, credited
• Salary of employee is expense
True
• Computer is a current asset
false, non – current asset
• Merchandise Inventory is a current asset
True
Inventory System
• Perpetual Inventory System
Under perpetual system, inventory record is updated on run-time
basis i.e. regularly after every transaction. As every purchase, return or
sale transaction is being recorded directly in inventory account.
• Periodic Inventory System

Under periodic system inventory records are maintained/updated in
intervals like at the end of every week or month.
Journal Entries Under Perpetual Inventory System
Transactions Debit Credit
When goods are purchased on account Merchandise Inventory Accounts Payable
When goods are purchased on cash
Merchandise Inventory Cash
basis
When expenses such as freight - in is
incurred
When goods are returned to supplier Accounts Payable/Cash Merchandise Inventory

(damaged or wrong item)
When goods are sold to customer on Accounts Receivables Sales
account Cost of Goods Sold Merchandise Inventory
Cash Sales
When goods are sold to customers on
cash basis
Cost of Goods Sold Merchandise Inventory
When goods are returned by customer Sales Returns and Allowances Accounts Receivables/Cash
Merchandise Inventory Cost of Goods Sold
Example:
The Business, Jel Enterprise was registered as a single proprietorship with the
Department of Trade and Industry. The company uses perpetual inventory
system. Determine the debit and credit in every transactions.
• July 1, 2018 – bought computer on account for Php15,000
• July 2, 2018 – bought office supplies on cash basis for Php500
• July 4, 2018 – sold merchandise for Php100,000. The cost of merchandise sold
was Php8,000
• July 5, 2018 – bought merchandise on cash basis for Php5,000
• July 10, 2018 – sold merchandise for Php2,000. Cost of merchandise is
Php1,500
• July 11, 2018 – made refund to cash customer for defective merchandise,
Php500
Date Debit Credit
Equipment Cash
July 1, 2018 (15,000.00) (15,000.00)
Office Supplies Cash
July 2, 2018 (500.00) (500.00)
Cash Sales
(10,000.00) (10,000.00)
July 4, 2018
(8,000.00) (8,000.00)
July 5, 2018 (5,000.00) (5,000.00)
Cash Sales
(2,000.00) (2,000.00)
July 10, 2018
(1,500.00) (1,500.00)
Sales Cash
(500.00) (500.00)
July 11, 2018
Merchandise Inventory Cost of Goods Sold
(500.00) (500.00)
Journal Entries Under Periodic Inventory System
Transactions Debit Credit
When goods are purchased on account Purchases Accounts Payable
When goods are purchased on cash basis Purchases Cash
When expenses such as freight - in is
Freight - in Cash
incurred
When goods are returned to supplier Accounts Payable/Cash Purchases Returns and Allowances
When goods are sold to customer on
Accounts Receivables Sales
account
When goods are sold to customers on
Cash Sales
cash basis
When goods are returned by customer
Sales Returns and Allowances Accounts Receivables/Cash
Inventory Ending & Cost of
Purchases & Inventory Beginning
At the end of the period Goods Sold
Example:
The Business, Jel Enterprise was registered as a single proprietorship with the
Department of Trade and Industry. The company uses periodic inventory
system. Determine the debit and credit in every transactions.
• July 1, 2018 – bought computer on account for Php15,000

• July 2, 2018 – bought office supplies on cash basis for Php500
• July 4, 2018 – sold merchandise for Php100,000. The cost of merchandise
sold was Php8,000
• July 5, 2018 – bought merchandise on cash basis for Php5,000
• July 10, 2018 – sold merchandise for Php2,000. Cost of merchandise is
Php1,500
• July 11, 2018 – made refund to cash customer for defective merchandise,
Php500
• July 31, 2018 – merchandise inventory is Php3,000
Date Debit Credit
Equipment Cash
July 1, 2018 (15,000.00) (15,000.00)
Office Supplies Cash
July 2, 2018 (500.00) (500.00)
Cash Sales
July 4, 2018
(10,000.00) (10,000.00)
Purchases Cash
July 5, 2018 (5,000.00) (5,000.00)
Cash Sales
July 10, 2018
(2,000.00) (2,000.00)
Sales Cash
(500.00) (500.00)
July 11, 2018
Sales Returns and Allowances Cash
(500.00) (500.00)
Quick Test!
Magalang Distributors, was registered as a single proprietorship with the Department of
Trade and Industry. Using the account titles listed in the chart of account earlier determine
the debit and credit account in each transaction (perpetual inventory system).
• May 1, 2018 – Yrma Magalang invested 30,000.
• May 2, 2018 – bought computer equipment for 15,000.00
• May 3, 2018 – bought merchandise on account from Lin – lin Supply Co., 10,000, term
2/10, n/30
• May 4, 2018 – sold merchandise on account for 5,000, FOB Destination, terms 2/10,
n/30. The cost of merchandise sold was 4,000.00
• May 5, 2018 – paid 200.00 freight on May 4 sale
• May 6, 2018 – received credit from Lin – lin Supply Co., for merchandise returned, 500.00
• May 11, 2018 – Paid Lin – lin Supply Co.
• May 13, 2018 – Collected from May 4 customer
• May 14, 2018 – bought merchandise on cash basis for 6,000
• May 16, 2018 – borrowed money from DBP Bank, 50,000
• May 17, 2018 – received refund from a supplier on cash purchase of May 14,
500.00
• May 18, 2018 – bought merchandise, 5,000.00, FOB shipping point, terms, 2/10,
n/30
• May 20, 2018 – paid freight on May 18 purchase, 200.00
• May 23, 2018 – sold merchandise for 3,000.00. The merchandise sold had a cost
of 2,500.00
• May 27, 2018 – paid May 18 purchase, 3,000.00. No discount allowed for partial
payment.
• May 28, 2018 – Y. Magalang got cash from the business, 1,000.00
• May 29, 2018 – made refund to cash customer for defective merchandise, 300.00
• May 30, 2018 – paid the following: Utilities,500; rent, 1,000;salaries,2,000.00
Date Debit Credit
Cash Y. Maglasang, Capital
May 1, 2018
(30,000.00) (30,000.00)
Office Equipment Cash
May 2, 2018
(15,000.00) (15,000.00)
Merchandise Inventory Accounts Payable
May 3, 2018
(10,000.00) (4,000.00)
(5,000.00) (5,000.00)
May 4, 2018
COGS Mdse. Inventory
(4,000.00) (4,000.00)
Freight - out Cash
May 5, 2018
(200.00) (200.00)
Accounts Payable Merchandise Inventory
May 6, 2018
(500.00) (500.00)
Merchandise Inventory
Accounts Payable (190.00)
May 11, 2018
(9,500.00) Cash
(9,310.00)
Cash
(4,900.00) Accounts Receivables
May 13, 2018
Sales Discounts (5,000.00)
(100.00)
May 14, 2018
(6,000.00) (6,000.00)
Cash Notes Payable
May 16, 2018
(50,000.00) (50,000.00)
Cash Merchandise Inventory
May 17, 2018
(500.00) (500.00)
Merchandise Inventory Accounts Payable
May 18, 2018
(5,000.00) (5,000.00)
May 20, 2018
(200.00) (200.00)
Sales
Cash
(3,000.00)
May 23, 2018 (3,000.00)
Merchandise Inventory
Cost of Goods Sold (2,500.00)
(2,500.00)
Accounts Payable Cash
May 27, 2018
(3,000.00) (3,000.00)
Y. Maglasang, Drawings Cash
May 28, 2018
(1,000.00) (1,000.00)
May 29, 2018
(300.00) (300.00)
Utilities Expense
(500.00)
Rent Expense Cash
May 30, 2018
(1,000.00) Salaries (3,500.00)
Expense
(2,000.00)
Quick Test!
Magalang Distributors, was registered as a single proprietorship with the Department of
Trade and Industry. Using the account titles listed in the chart of account earlier
determine the debit and credit account in each transaction (periodic inventory system).
• May 1, 2018 – Yrma Magalang invested 30,000.

• May 2, 2018 – bought computer equipment for 15,000.00
• May 3, 2018 – bought merchandise on account from Lin – lin Supply Co., 10,000,
term 2/10, n/30
• May 4, 2018 – sold merchandise on account for 5,000, FOB Destination, terms 2/10,
n/30.
• May 5, 2018 – paid 200.00 freight on May 4 sale
• May 6, 2018 – received credit from Lin – lin Supply Co., for merchandise returned,
500.00
• May 11, 2018 – Paid Lin – lin Supply Co.
• May 13, 2018 – Collected from May 4 customer
• May 14, 2018 – bought merchandise on cash basis for 6,000
• May 16, 2018 – borrowed money from DBP Bank, 50,000
• May 17, 2018 – received refund from a supplier on cash purchase of May 14,
500.00
• May 18, 2018 – bought merchandise, 5,000.00, FOB shipping point, terms, 2/10,
n/30
• May 20, 2018 – paid freight on May 18 purchase, 200.00
• May 23, 2018 – sold merchandise for 3,000.00.
• May 27, 2018 – paid May 18 purchase, 3,000.00. No discount allowed for partial
payment.
• May 28, 2018 – Y. Magalang got cash from the business, 1,000.00
• May 29, 2018 – made refund to cash customer for defective merchandise, 300.00
• May 30, 2018 – paid the following: Utilities,500; rent, 1,000;salaries,2,000.00
• May 30, 2018 – inventory is 10,000.00
Date Debit Credit
Cash Y. Maglasang, Capital
May 1, 2018
(30,000.00) (30,000.00)
Office Equipment Cash
May 2, 2018
(15,000.00) (15,000.00)
Purchases Accounts Payable
May 3, 2018
(10,000.00) (4,000.00)
May 4, 2018
(5,000.00) (5,000.00)
Freight - out Cash
May 5, 2018
(100.00) (100.00)
Accounts Payable Purchase Returns & Allowances
May 6, 2018
(500.00) (500.00)
Purchase Returns & Allowances
Accounts Payable (190.00)
May 11, 2018
(9,500.00) Cash
(9,310.00)
Cash
(4,900.00) Sales Accounts Receivables
May 13, 2018
Discount (5,000.00)
(100.00)
Date Debit Credit
Purchases Cash
May 14, 2018
(6,000.00) (6,000.00)
Cash Notes Payable
May 16, 2018
(50,000.00) (50,000.00)
Cash Purchase Returns & Allowances
May 17, 2018
(500.00) (500.00)
Purchases Accounts Payable
May 18, 2018
(5,000.00) (5,000.00)
Freight - in Cash
May 20, 2018
(200.00) (200.00)
Cash Sales
May 23, 2018
(3,000.00) (3,000.00)
Accounts Payable Cash
May 27, 2018
(3,000.00) (3,000.00)
Y. Maglasang, Drawings Cash
May 28, 2018
(1,000.00) (1,000.00)
Date Debit Credit
May 29, 2018
(300.00) (300.00)
Utilities Expense
(500.00)
Rent Expense Cash
May 30, 2018
(1,000.00) (3,500.00)
Salaries Expense
(2,000.00)
Assignment
Problem No. 1
Lovely Breeze Co., was registered as a single proprietorship with the Department of Trade
and Industry. Determine the debit and credit account in each transaction (perpetual
inventory system).
• June 1, 2018 – Maria Drews invested 50,000.

• June 2, 2018 – bought computer equipment for 15,000.00 cash.
• June 2, 2018 – bought merchandise on account from ABC Co., 20,000, term 2/10, n/30
• June 3, 2018 – bought office supplies on cash basis for Php500
• June 4, 2018 – sold merchandise on account for 5,000, FOB Destination, terms 2/10, n/30.
The cost of merchandise sold was 4,000.00
• June 5, 2018 – Paid Php100 freight on June 4 sale
• June 6, 2018 – received credit from ABC Co., for merchandise returned, 500.00
• June 11, 2018 – Paid ABC Co.
• June 13, 2018 – Collected from June 4 customer
• June 14, 2018 – bought merchandise on cash basis for 4,000
• June 15, 2018 – salaries paid Php1,500
• June 16, 2018 – borrowed money from DBP bank, signed a promissory note for Php20,000
• June 17, 2018 – received refund from a supplier on cash purchase of June 14, 500.00
• June 18, 2018 – bought merchandise, 5,000.00, FOB Shipping point, terms, 2/10, n/30
• June 20, 2018 – Paid freight on June 18 purchase, Php500
• June 23, 2018 – sold merchandise for 3,000.00. the merchandise sold had a cost of
Php2,500
• June 26, 2018 – bought merchandise for cash, Php5,000
• June 27, 2018 – paid June 18 purchase, Php2,500. No discount allowed on partial payment
• June 28, 2018 – M. Drews got cash from the business, 1,000.00
• June 29, 2018 – made refund to cash customer for defective merchandise, 300.00
• June 30, 2018 – sold merchandise on account, Php12,500, n/30. Cost of merchandise sold
is Php10,000
• June30, 2018 – paid the following: advertising, 1,000 electricity and water,500; rent,
1,000;salaries,2,000.00
Problem No. 2
Lovely Breeze Co., was registered as a single proprietorship with the Department of
Trade and Industry. Determine the debit and credit account in each transaction
(periodic inventory system).

• June 2, 2018 – bought merchandise on account from ABC Co., 20,000, term 2/10,
n/30
• June 4, 2018 – sold merchandise on account for 5,000, FOB Destination, terms
2/10, n/30.
• June 23, 2018 – sold merchandise for 3,000.00.
• June 30, 2018 – sold merchandise on account, Php12,500, n/30.
• June30, 2018 – paid the following: advertising, 1,000 electricity and water,500; rent,
1,000;salaries,2,000.00
• June 30, 2018 – Inventory June 30, Php20,000
What is Bookkeeping?
Bookkeeping involves the recording, on a daily
basis, of a company’s financial transactions. With
proper bookkeeping, companies are able to track
all information on its books to make key
operating, investing, and financing decisions.
Business Documents
Business transactions are supported with documents. They are
pieces of evidence of payments made and receipts of cash. Other
business papers are prepared to support transactions other than cash.
The most common business papers used are:
• Cash/Check Voucher
• Official Receipt
• Cash Sales Invoice
• Account Sales Invoice
• Deposit Slip
• Promissory Note
Cash/Check Voucher
is a document which evidences payment. It contains information
about the transaction, the payee, and the approving official.
Official Receipt
is a document which evidences receipts of cash. It contains
information as to payor and transaction involved.
Cash Sales Invoice
is a business document which evidences sale of service or
merchandise for cash only.
Account Sales Invoice
is a document prepared for sales on account only.
Deposit Slip
is a document evidencing the deposit of money in the bank.
Everytime a deposit is made, a deposit is filled up.
Promissory Note
is a written promise made by the maker to pay the payee(creditor)
as sum certain in money at a fixed or determinable future time.
The Accounting Cycle
• Journalization – the process of recording the business transaction in the
journal.
• Posting to ledger – the process of transferring the information from the
journal to ledger.
• Preparing the trial balance - the process of taking the balances of open
accounts in the ledger.
• Adjusting the book – are entries prepared at the end of the accounting
period to update the records.
• Preparing the financial statements – preparation of the accounting reports.
• Closing the book – refers to the preparation of closing entries at the end of
the accounting period to bring the income and expense account to zero
balance.
• Preparing a post – closing trial balance – refers to the preparation of
the trial balance after closing the income and expense accounts. The
post closing trial balance shows only the assets, liabilities, and
owner’s equity.
• Reversing entries – are prepared at the beginning of the next
accounting period to reverse certain adjustments that were made at
the end of the accounting period.
Journalization
Journalization is the recording of business transactions in terms of debit and
credit in a journal. The simplest form of a journal is the general journal.
Types of Journal Entry:

1. Simple journal entry – when there is only one debit and credit entry.
2. Compound journal entry – when the journal entry has two or more debits
and/or two or more credits. A compound entry may take any of the following
forms
a. one debit and two or more credits
b. two or more debits and one credit
c. two or more debits and two or more credits.
How to Journalize Transaction
• Enter the date and the year in the date column.
• The debit entry is placed in the “description” column.
• The credit entry is placed immediately on the next line after the debit
entry indented about one – half inch.
• A brief explanation is written on the third line which is also indented .
• Leave the next line blank before entering the second journal entry.
• A complete journal entry is composed of a debit and credit entry plus
a brief explanation.
• The amounts are entered in the debit and credit column in their
proper money column.
• The “F” in the F – column stands for “Folio” or Reference.
Problem No. 1
and Industry. Determine the debit and credit account in each transaction (perpetual
inventory system).

The cost of merchandise sold was 4,000.00
• June 23, 2018 – sold merchandise for 3,000.00. the merchandise sold had a cost of
Php2,500
• June 30, 2018 – sold merchandise on account, Php12,500, n/30. Cost of merchandise sold
is Php10,000
• June30, 2018 – paid the following: electricity and water,500; rent, 1,000;salaries,2,000.00
Use this Chart of Accounts for Journalization:
100Assets 400Income
101Cash 401Sales
105Accounts Receivable 405Sales Returns and Allowances
115Merchandise Inventory 410Sales Discounts
120Supplies 500Expenses
150Equipment 501Cost of Goods Sold
200Liabilities 503Advertising Expense
201Accounts Payable 506Freight - out
202Notes Payable 510Rent Expense
300Equity 530Salaries
301Drews, Capital 540Utilities
302Drews, Drawings 601Income Summary
Problem No. 2
and Industry. Determine the debit and credit account in each transaction (periodic inventory
system).

• June 23, 2018 – sold merchandise for 3,000.00.
• June 30, 2018 – sold merchandise on account, Php12,500, n/30.
• June30, 2018 – paid the following: electricity and water,500; rent, 1,000;salaries,2,000.00
• June 30, 2018 – Inventory June 30, Php20,000
Posting to Ledger
Posting is the process of transferring information from
the journal to the ledger.
Journal is called the book of the original entry because

the transactions are recorded for the first time. While
ledger is called the book of final entry because the
entries are finally summarized in this book.
Procedures in Posting
1. The bookkeeper should first examine the chart of accounts to help
him in recording the transactions.
2. Open the accounts in the ledger.
a. Write the account title and the account name at the upper write
corner of the page.
b. Fill the columns with Date, Ref/Post, Debit and Credit side.
3. Transfer the information from the journal to the ledger by copying
the date and the debit entry on the debit side of the ledger and also
the credit entry on the credit side of the ledger.
4. Write the page of the journal in the “Ref/Post” column.
5. Follow the same steps until all the entries in the journal are
transferred to the ledger.
Examples
Trial Balance
Trial Balance shows the balance of an account brought about by the
business. An account is said to have a debit balance when the debit
total is more than the credit total, and a credit balance when the credit
total is more than the debit balance.
Adjusting Entries
Adjusting entries are journal entries usually prepared at the end of the accounting
period to update the records in order to present fairly accurate financial reports.
Adjusting entries are needed because there are transactions which are not yet
recorded during the accounting period. The following adjustments are made at the end of
the accounting period:
o Adjustments for unrecorded income or accrued income
o Adjustments for unrecorded expense or accrued expense
o Adjustments for bad debts
o Adjustments for depreciation
o Adjustments for prepaid expenses
o Adjustments for precollected income
o Setting up the ending inventory
Accrued Expenses
They are expenses already incurred but not yet paid.
Salaries Expense xxx

Salaries Payable xxx
Rent Expense xxx

Rent Payable xxx
Depreciation
Depreciation may be defined as that portion of the cost of a fixed
assets that is charged to income for a particular year or period. All
property and equipment except land are subject to depreciation.
Depreciation is the decrease in the utility of the asset.
Depreciation Expense xxx

Accumulated Depreciation – Equipment xxx
Bad Debts
The account refers to the portion of the Accounts Receivable which may prove
to be uncollectible. Some methods of computing bad debts:
1. A certain percentage of the accounts receivables
2. A certain percentage of Sales or Income
3. Aging of the Accounts Receivables
4. Arbitrary amounts – any amount desired by the business based on studies
Bad Debt Expense xxx

Allowance for Bad Debts xxx
Prepaid Expenses
Prepaid Expenses are expenses paid in advance the benefits of

which have not yet been received.
Entry upon payment:

Prepaid Rent xxx
Cash xxx
Adjusting Entry:
Rent Expense xxx
Prepaid Rent xxx
Precollected Income
The term refers to the income received in advance.
Entry upon receiving the income:

Cash xxx
Unearned Interest Income xxx
Adjusting Entry:
Unearned Interest Income xxx
Interest Income xxx
Preparing the Financial Statements
• Statement of Performance (Income Statement)
• Statement of Equity
• Statement of Financial Position (Balance Sheet)
• Statement of Cash Flows
Use this Chart of Accounts for Financial Statements
100 Assets 400 Income

101 Cash and Cash Equivalents 401
105 Receivables 405 Net Sales
115 Inventories 410
120 Prepaid Expenses 500 Expenses
150 Property Plant and Equipment 501 Cost of Goods Sold
200 Liabilities 503 Advertising Expense
201 Accounts Payable 506 Freight Out
202 Notes Payable 510 Rent Expense
300 Equity 530 Salaries
301 Drews, Capital 540 Utilities
302 Drews, Drawings
Closing Entries
Closing entries are prepared at the end of each year to distinguish
the income and expenses for the different accounting year. Each year is
treated independently for the purpose of income determination.
In the closing the nominal accounts, temporary accounts, Income

Summary is opened at the end of the accounting period to absorb the
income and expense accounts before finally closing it to capital.
Steps in Closing Entries
• Debit the accounts credited in the Income Statement and credit
income summary
• Debit Income Summary and credit all accounts also under the Income
Statement
• Close the balance of the Income Summary to Drawing account
• Then, prepare the Post Closing Trial Balance

Basic Bookkeeping

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Basic Bookkeeping

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BASIC

Is the art of recording, classifying and

Examples of Current Assets

Examples of Non – current Assets:

• Non – current Liabilities

o Owner’s Drawing – is a term that shows the withdrawal of cash or

o Income and Expense Summary – is a temporary account opened at

1. BOUGHT COMPUTER COMPUTER (OFFICE CASH

2. PAID SALARIES SALARIES EXPENSE CASH

3. RENDERED SERVICE CASH SERVICE INCOME

4. SOLD SUPPLIES •CASH •SALES INCOME

5. MISS. REYES INVESTED IN CASH REYES, CAPITAL

oMay 1 – Dr. Reynaldo Casas invested cash of Php10,000

o April 1, 2016, the business was registered with Department of Trade

A CHART OF ACCOUNTS IS A LIST OF ACCOUNTS TITLES

• CALENDAR YEAR OR PERIOD

• Periodic Inventory System

When goods are returned to supplier Accounts Payable/Cash Merchandise Inventory

• July 1, 2018 – bought computer on account for Php15,000

• May 1, 2018 – Yrma Magalang invested 30,000.

• June 1, 2018 – Maria Drews invested 50,000.

• June 1, 2018 – Maria Drews invested 50,000.

Types of Journal Entry:

• June 1, 2018 – Maria Drews invested 50,000.

• June 1, 2018 – Maria Drews invested 50,000.

Journal is called the book of the original entry because

Salaries Expense xxx

Rent Expense xxx

Depreciation Expense xxx

Bad Debt Expense xxx

Prepaid Expenses are expenses paid in advance the benefits of

Entry upon payment:

The term refers to the income received in advance.

Entry upon receiving the income:

100 Assets 400 Income

In the closing the nominal accounts, temporary accounts, Income

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