Fundamentals of Accountancy, Business and Management 1: Second Quarter

11
FUNDAMENTALS OF
ACCOUNTANCY,
BUSINESS AND
MANAGEMENT 1
Second Quarter
LEARNING ACTIVITY SHEETS
i
COPYRIGHT PAGE
Learning Activity Sheet in Fundamentals of Accountancy,

Business and Management
Grade 11
Copyright @ 2020
DEPARTMENT OF EDUCATION
Regional Office No. 02 (Cagayan Valley)
Regional Government Center, Carig Sur, Tuguegarao City, 3500
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However, prior approval of the government agency or office wherein the work is created shall be
necessary for exploitation of such work for profit.”
This material has been developed for the implementation of the K to 12 Curriculum through the
Curriculum and Learning Management Division (CLMD). It can be reproduced for educational
purposes and the source must be acknowledged. Derivatives of the work including creating an
edited version, an enhancement of supplementary work are permitted provided all original works
are acknowledged and the copyright is attributed. No work may be derived from the material for
commercial purposes and profit.
Consultants:
Regional Director ESTELA L. CARIŇO, EdD, CESO IV
Assistant Regional Director RHODA T. RAZON, EdD, CESO V
Schools Division Superintendent MADELYN L. MACALLING, PhD, CESO VI
Assist. Schools Division Supt. EDNA P. ABUAN, PhD
DANTE J. MARCELO, PhD, CESO VI
Chief Educ. Supervisor, CLMD OCTAVIO V. CABASAG, PhD
Chief Education Supervisor, CID RODRIGO V. PASCUA, EdD
Development Team
Writers : Marcris T. Domingo, Desserie R. Figuracion and Lourdes D. Pedro
Content Editors : Inocencio T. Balag,EPS Math, SDO Isabela
Cyril M. Pacunana, Claudine Sevilleja, Mary Mendoza
Focal Persons : Inocencio T. Balag, EPS Math, SDO Isabela

Cristina Acosta, EPS LRMDS, SDO Isabela
Isagani R. Duruin, EPS Math, DepEd RO2-CLMD
Rizalino G. Caronan, EPS LRMDS- CLMD
Printed by DepEd Regional Office No. 02

Regional Center, Carig Sur, Tuguegarao City
ii
TABLE OF CONTENTS
Competency Page No.
Prepares the Adjusting Entries 1
Complete the Accounting Cycle 10
Describes the nature of transactions in a merchandising business 37

Records transactions of a merchandising business in the general and special journals 40
Posts transactions in the general and subsidiary ledgers 66

Prepares a trial balance 90
The learner prepares adjusting entries 104
The learner completes the accounting cycle of a merchandising business
The learner prepares the Statement of Cost of Goods Sold and Gross Profit 117
iii
FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS AND MANAGEMENT 1
Name of Learner: ________________________________ Grade Level: _______________
Section: ________________________________________ Date: _____________________
LEARNING ACTIVITY SHEET

Prepares the Adjusting Entries
Background Information for Learners

Now that we have the correct and balanced trial balance, we will begin the next step with
the confidence that account balances that we will be “adjusting” are correctly stated. Before we
proceed, it is important to understand that, strictly, “adjusting” should not be used interchangeably
with “correcting”. Adjusting entries are adjustments to bring the assets, liabilities, revenue and
expenses up to.
Accounting utilizes “adjusting entries “at the end of an accounting period to split separate
mixed accounts. Mixed accounts are accounts that have components of asset and expenses, or
liability and income at the end of the accounting period. Remember to consider the two major
classification of adjusting entries (Accruals and Deferral) as well as the method use for each
classification when analyzing the given problem.
Learning Competency: Prepares the Adjusting Entries (ABM_FABM11-1Va-d-33)
Exercise 1
Directions: Analyse and prepare the necessary adjusting entries at year end 2019 of the
following independent transactions. Show your solutions.
{ 3 points each}
1. On December 01, 2019, Yan Company purchased supplies worth of P 12,000 from Dito Supplies
Trading. At the end of the Month, only P 3,000 worth of supplies inventory on hand. The
bookkeeper used the asset method in recording the transaction.
2. On November 15,2019, VJK Company subscribed to the Globe services. The monthly fee of P
4,000 is paid every 15th of the month. The payment on December 15, 2019 has been recorded by
a debit to utilities expense and credit to Cash of P4,000.
3. Roger’s rendered catering services last December 15,2019. The contract price amounted to P
63,000. Since no payment had been received yet, Rogers did not make any journal entry last Dec
15,2019.
1
4. On October 01,2019, Kaye Piano Services received a P 300,000, 8 % note for selling an
equipment not being used anymore in the business. The note will be payable in one year.
5. On December 1, 2019, LALA Company paid P 36,000 to GCQ Insurance Co. as insurance
premium for one year. The bookkeeper recorded the payment with a debit to prepaid Insurance
and credit to Cash for P 36,000.
Exercise 2
Directions: Solve the given problems

{ 3 points each}
1. A firm purchased equipment on May 1, 2019 for P 60,000. It is estimated that the equipment
will have a
P 6,000 residual value at the end of its ten-year useful life. Using the Straight line Method of
Depreciation, what will be the balance of the Accumulated Depreciation account on December
31,2021.
2. Ethan Company uses the allowance method in estimating doubtful accounts. During the first
year of operations, credit sales total P 1,300,000 but 60% of this amount have been collected. It is
the policy of the company to set up 3% of the outstanding receivables. For the current year, at what
amount should Doubtful Account Expense be presented in the income statement?
3. Aegean Airlines purchased a five year insurance policy for its airlines on June 1, 2019 for the
amount of P150,000 and debited it to an asset account. The company uses a calendar as its
accounting period. Assuming that June 1 is the effective date of the policy, How much is the correct
balance for the Prepaid Insurance account on December 31,2019.
Exercise 3
Let us go deeper. This activity requires you to recall your knowledge in preparing trial balance
with carefully adding the adjusting entries for the adjusted trial balance.
Directions: Prepare adjusting entries and adjusted trial balance of Praca General Services
{ Adjusting entries : 3 points each}
2
Praca General Services
Unadjusted Trial Balance
As of January 31,2020
Account Title Debit Credit
Cash ₱84,500
Accounts Receivable 12,300
Supplies 9,500
Prepaid Insurance 6,000
Office Equipment 24,000
Accounts Payable 12,200
Praca, Capital ₱106,000
Praca, Drawings 10,000
Service Revenue 45,200
Salaries Expense 14,000
Rent Expense 1,500
Utilities Expense 1,600
Total ₱163,400 ₱163,400
Additional information for adjustment:
a. Depreciation of Office Equipment, P 2000
b. Bad Debt expense is estimated at 2 % of the Accounts receivable balance.
c. The unused supplies balance is P 5,300
d. Unearned service revenue, 3000
e. The unexpired Insurance premium during the month, P5,500,
Guide Questions:
1. What are the correct entries and how much will be the correct amount of each
adjusting entries for the adjustment?
2. How much is the amount of the totals of debit and credit of the adjusted trial balance?
3
Rubrics for Scoring - Trial Balance
Criteria NI Fair Good Excellent
(5) (10) (15) (20)
Concept Does not Does not Understands Shows clear

understand understand concepts in understanding
concepts in concepts in preparing trial of the concepts
preparing trial preparing trial balance very in preparing a
balance very well balance very well with few trial balance
with major errors well with half errors.
errors.
Structure Heading is Correct heading Correct heading Correct
incorrect, omitted and double rule and double rule heading and
double rule in total the total the total double rule the
balance. Most of balance. Listing balance. Listing total balance.
the listed accounts of accounts of accounts is Listing of
is entered with 1-2 is not properly entered accounts is
incorrectly and properly with -3-4 properly
most of its entered with -3- incorrect entered with
amounts are not in 4 incorrect amounts in its correct
proper debit and amounts in its debit and credit amounts in its
credit column debit and credit column debit and credit
column column.
Computations Total balance of Total balance Total balance of Total balance
debit and credit of debit and debit and credit of debit and
columns are credit columns columns are credit columns
incorrect due to are incorrect incorrect due to are correct and
major errors and due to 3-4 1-2 errors but equal
not equal errors and not equal
equal
References:
Textbook: Fundamentals of Accountancy, Business, and Management 1.
Isabela CPA Review Center Bookkeeping hands out
Teacher’s Guide: Fundamentals of Accountancy, Business, and Management 1.
Joselito G. Florendo, Fundamentals of Accountancy, Business and Management 1
Valencia, et.al (2010). Basic Accounting 3rd ed. Valencia Educational Supply
Weygandt, J. et .al (20120. Accounting Principles 10th ed. John Wiley & Sons (Asia) Pte. Ltd.
4
Reflection
What did you learn from this activity?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Learning Activity Sheet 2

Answer Key
Exercise 1
1.
December 31 Supplies Expense P9,000

Supplies P9,000
Supplies Expense = Initial Supplies Inventory – Ending Supplies Inventory on hand
Supplies Expense = P12,000 – P3,000
Supplies Expense = P9,000
2.
December 31 Utilities Expense P2,000
Accrued Utilities Payable P2,000
The utilities expense of P2,000 pertains to utilities used for the second half of December. In
the adjusting entry above, Utilities Expense is debited to recognize the expense, and Accrued
utilities payable is credited for the used internet for the half month.
3.
December Accrued Service Revenue P63,000

31
Service Revenue P63,000
4.
5
October 31 Accrued interest income P 6,000
Interest Income P 6,000
5.
December 31 Insurance Expense P3,000
Prepaid Insurance P3,000
The prepaid insurance account has a balance of P33,000 (December 1 prepayment of
P36,000 less P3,000) and insurance expense reflects the expired cost of P3,000 for the
month of December
Exercise 2
1.
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐴𝑠𝑠𝑒𝑡 − 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝑉𝑎𝑙𝑢𝑒
𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡 =
𝑈𝑠𝑒𝑓𝑢𝑙 𝑙𝑖𝑓𝑒 𝑜𝑓 𝑎𝑛 𝐴𝑠𝑠𝑒𝑡
60,000 − 6,000
𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡 =
10
𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡 = 5,400 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟 or 450 per Month ( 5,400 /12)
8
May 1, 2019 to December 31, 2021 consists of 32 months or years. It will be
3
used to compute for the accumulated depreciation.
8
𝐴𝑐𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑒𝑑 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = 5,400 × 3
or 450 x 32 Months
𝐴𝑐𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑒𝑑 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = 𝑃14,400
2.
Amount of uncollected receivables = 1,300,000 × 40%
Amount of uncollected receivables = 520,000
Doubtful Account Expense = 520,000 × 3%

Doubtful Account Expense = 15,600
6
3
Seven months, out of 60 months (5 years),
Exerciseof 3the prepaid insurance have
already expired. This means that the prepaid balance can still be used for 53
months. Converting this to its monetary value, we get:
53
𝐵𝑎𝑙𝑎𝑛𝑐𝑒 𝑓𝑜𝑟 𝑃𝑟𝑒𝑝𝑎𝑖𝑑 𝐼𝑛𝑠𝑢𝑟𝑎𝑛𝑐𝑒 = × (150,000)
60
𝐵𝑎𝑙𝑎𝑛𝑐𝑒 𝑓𝑜𝑟 𝑃𝑟𝑒𝑝𝑎𝑖𝑑 𝐼𝑛𝑠𝑢𝑟𝑎𝑛𝑐𝑒 = 132,500
Exercise 3
Adjusting Entries
a. Depreciation of Office Equipment, P2,000

January 31 Depreciation Expense P2,000
Accumulated Depreciation P2,000
Depreciation is recorded by debiting Depreciation Expense and crediting Accumulated

Depreciation. Depreciation Expense is an expense account, while Accumulated Depreciation is a
contra-asset account which is presented as a deduction to the related fixed asset.
b. Bad Debt Expense is estimated at 2% of the Accounts Receivable balance
January 31 Doubtful Accounts 246
Allowance for Doubtful Accounts 246
Doubtful accounts expense is debited, and Allowance for Doubtful accounts is credited.
Two percent of the Accounts Receivable balance is P246. (12,300 × 2% = 246)
c. The unused supplies balance is P5,300

January 31 Supplies Expense 4,200
Supplies 4,200
Out of the P9,500 worth of supplies, unused supplies balance is P5,300. This means that
P9,500 less P5,300, which is equal to P4,200, is the supplies that have been used. Supplies Expense
is debited, while Supplies account is credited.
d. Unearned Service Revenue, P3,000

January 31 Service Revenue P3,000
7
Unearned Service P3,000
Revenue
Using the asset method (or the income method) of recording adjusting entry for unearned
revenue, Service Revenue account is debited, while the Unearned Service Revenue is credited.
e. Insurance Premium expired during the month, P500

January 31 Insurance Expense P500
Prepaid Insurance P500
Insurance expense (debit) reflects the expired cost of P500 for the month of January.
Meanwhile, the Prepaid Insurance account is credited.
Continuation of Exercise 3
After incorporating the adjustments above, the adjusted trial balance will look like this. Just like
in the unadjusted trial balance, total debits and total credits are equal.

Adjusted Trial Balance
As of January 31, 2020
Cash P 84,500
Allowance for Doubtful Accounts 246
Supplies 5,300
Accumulated Depreciation-Office Equipment P 2,000
Unearned Service Revenue 3,000
Praca, Capital 106,000
8
Rent Expense 1,500
Depreciation Expense for Office Equipment 2,000
Doubtful Accounts Expense 246
Supplies Expense 4,200
Insurance Expense 500
Total P 165,646 P 165,646
9
Section: ________________________________________ Date: _____________________

Complete the Accounting Cycle

After performing the previous steps in the accounting cycle, we will move now to
the next accounting processes, the preparation of financial statements, closing entries and post-
closing trial balance. The financial statements must be relevant, reliable and comparable. Most of
all, it must follow the applicable Philippine Financial Reporting Standards.
At the end of the accounting period, all temporary (nominal) are closed, then, Post-Closing
Trial Balance is prepared after recording and posting all the closing entries. The balances of
permanent or real accounts become the starting balances for the next accounting period.
Learning Competency with code:

Complete the Accounting Cycle.
ABM_FABM11- IVa-d -34
Exercise 1
Directions: Prepare the statement of financial performance using the information of adjusted
trial balance of Praca General Services for the Month of January 31, 2020.

January 31, 2020
Cash P 84,500
Supplies 5,300
10
Accumulated Depreciation P 2,000
Unearned Service Revenue 3,000
Praca, Capital 106,000
Rent Expense 1,500
Depreciation Expense- Office Equipment 2,000
Bad Debt Expense 246
Total P 165,400 P 165,400
Guide Questions:
1. What are the accounts included in preparing the Statement of Financial Performance?
2. How much net income computed from the given transaction?
Exercise 2
Directions: Prepare the Statement of Financial Position of Sherwin’s Delivery Services using the
information of their first month of operation for the month of November 2019.The business had
the following accounts:
Cash P 90,000
Prepaid expense 30,000
Land 160,000
Building 200,000
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Notes Payable 30,000
Sherwin’s, Capital 300,000
Allowance for Doubtful Accounts 5,000
Accumulated Depreciation 20,000
Reported net income 55,000
Guide Questions:
1. What will be the proper heading to be used for the Statement of Financial Position?
2. Are the given transaction balances satisfy the equation Asset= Liabilities + Owners
Equity? If not, check the missing account and amount before proceeding in preparing a statement
of financial position.
3. Compute for the total Assets and Liabilities and Owner’s Equity.
Exercise 3: Let us go deeper. In this Activity, your knowledge on the whole accounting process
is needed. Please feel free to review your previous activities. And I will give four hours to finish
this activity.
Directions: Prepare the complete accounting cycle of Mr.Kan for the month of January 2020. Use
all the information for the preparation below.
Mr. Chandler Kan established Tax and Accounting services and had the following
transactions for the month of January 2020
Jan
6 Kan Invested P 200,000 into the business
Received a charge Invoice from a supplier for the purchase of a desktop computer
amounting to P 33,000 on account. The computer is estimated to be useful for five
7 years and have a salvage value of 3,000 thereafter
9 Purchased supplies amounting to P 19,500 in cash.
13 Paid 12,000 insurance for 1 year
Issued a service invoice for an amount of P 50,000 to a customer for services
15 rendered on account.
16 Received collections from customers on account, P 40,000
20 Paid P 20,000 as partial payment for purchase of equipment on account
22 Billed P 30,000 to customer for the services rendered
23 Borrowed P 15,000 from the bank
31 Paid P 16,000 for the salaries of employees
31 Kan withdrew P 11,000 from the business
31 Paid the bill of telephone amounting to P 2,500
31 Supplies remaining on hand worth P 12,000
12
Additional information for adjustment:
a. Depreciation of Office Equipment, P 500.
b. The unexpired Insurance premium during the month, P 11,000.
Use the following Charts of Accounts:
Kans Taxes and Accounting Services

CHART OF ACCOUNTS
Code ASSETS Code EQUITY
101 Cash 301 Kan , Capital
111 Accounts Receivable 311 Kan , Drawing
121 Supplies
131 Prepaid Insurance INCOME
151 Office Equipment 401 Service Revenue
152 Accumulated Depreciation-
Office Equipment EXPENSES
LIABILITIES 501 Salaries Expense
201 Accounts Payable 511 Supplies Expense
202 Notes Payable 512 Utilities Expense
211 Loans Payable 513 Insurance Expense
514 Depreciation Expense
601 Income and Expense Summary
Prepare the following:

a. Journal entries
b. General Ledger
c. Unadjusted trial Balance
d. Adjusting entries
e. Adjusted Trial balance
f. Statement of Financial Performance
g. .Statement of changes in Equity
h. Statement of financial Position
i. Statement of Cash Flows.
j. Closing entries
k. Post- Closing Trial Balance
13
Guide Questions:
1. What will be the proper heading to be used for the Statement of Financial Position,
Statement of Financial Performance and Statement of Changes in Equity and Cash flow
statement?
2. What will be the correct account titles and how much will be the amount use in the
given transaction, in adjusting entries and in closing entries?
Rubrics for Scoring Income Statement

(3) (5) (8) (10)

preparing trial preparing trial balance very in preparing
balance and with balance very well with few Income
Major errors well with half errors. statement
errors.
Structure Heading is Correct heading Correct heading Correct
incorrect; and DOUBLE and DOUBLE heading and
DOUBLE RULE RULE the total RULE the total DOUBLE
in total balance is balance. Listing balance. Listing RULE the total
omitted. Most of of account titles of account titles balance. Listing
the listed accounts with 1-2 is not is properly of account titles
and amounts is properly entered with -3- is properly
entered incorrectly entered with -3- 4 incorrect entered with
4 incorrect amounts correct
amounts
amounts
Computations Obtained incorrect Obtained Obtained Obtained
net income/loss incorrect net incorrect net correct net
due to major income/loss income/loss due income/loss
errors due to 3-4 to 1-2 errors
errors
14
Rubrics for Scoring Statement of Financial Position
(5) (10) (15) (20)

preparing trial preparing trial balance very in preparing
balance very well balance very well with few income
with Major errors well with half errors. statement
errors.
Structure Incorrect heading Correct heading Correct heading Correct
and DOUBLE and DOUBLE and DOUBLE heading and
RULE total RULE the total RULE the total DOUBLE
balance is omitted. balance. Listing balance. Listing RULE the total
Most of the listed of accounts of accounts is balance. Listing
accounts and with 1-2 is not properly entered of accounts is
amounts is entered properly with -3-4 properly
incorrectly entered with -3- incorrect entered with
4 incorrect amounts correct
amounts amounts
Computations Obtained incorrect Obtained Obtained Obtained
answer due to incorrect incorrect answer correct answer.
major errors. answer due to due to 1-2 Assets vs.
Assets vs. 3-4 errors. errors. Assets liabilities &
liabilities & Assets vs. vs. liabilities & owner’s equity
owner’s equity is liabilities & owner’s equity is equal
not equal owner’s equity is equal
is not equal
References
Textbook: Fundamentals of Accountancy, Business, and Management 1.
Isabela CPA Review Center Bookkeeping hands out
Teacher’s Guide: Fundamentals of Accountancy, Business, and Management 1.
Joselito G. Florendo, : Fundamentals of Accountancy,Business and Management 1
Valencia, et.al (2010). Basic Accounting 3rd ed. Valencia Educational Supply
Weygandt, J. et .al (20120. Accounting Principles 10th ed. John Wiley & Sons (Asia) Pte. Ltd.
15
Reflection:
What did you learn from this activity?
______________________________________________________________________________
______________________________________________________________________________
_____________________________________________________________________
ANSWER SHEETS FOR ACCOUNTING CYCLE

General Journal
GJ-1
Date Account Title and Explanation PR Debit Credit
06-Jan
13
15
16
16
20
22
23
31
GJ-2
31
31
31
17
Account Name: CASH
Account No. 101 Balance
Date Particulars Post Debit Credit Debit Credit
Account Name: ACCOUNTS RECEIVABLE

Account Name: SUPPLIES

Account Name: Prepaid Insurance

18
Account Name: OFFICE EQUIPMENT
Account No.151 Balance
Account Name: ACCUMULATED DEPRECIATION-OFFICE EQUIPMENT

Account Name: ACCOUNTS PAYABLE

Account Name: Loans Payable

Account Name: KAN, CAPITAL

Account Name: KAN, DRAWINGS

Account Name: INCOME AND EXPENSE SUMMARY

19
Account Name: SERVICE REVENUE
Account Name: SALARIES EXPENSE

Account Name: SUPPLIES EXPENSE

Account Name: UTILITIES EXPENSE

Account Name: INSURANCE EXPENSE

20
Account Name: DEPRECIATION EXPENSE
ADJUSTING ENTRIES
GJ-3
31-Jan
31
21
Statement of Financial Performance
Statement of Changes in Equity
22
Statement of Financial Position
ASSETS
LIABILITIES AND OWNER'S EQUITY
23
Cash Flow Statement
Cash Flow from Operating Activities:
Cash Flow from Investing Activities
Cash Flow from Financing Activities
Total Cash from Financing Activities

Increase in Cash
Cash Balance,
Cash Balance,
Closing Entries
GJ-4
31-Jan
31
31
24
31
Kan Taxes and Accounting Firm

Post-Closing Trial Balance
January 31,2020
25
Learning Activity Sheet 3
Answer Key
Exercise 1

For the Month ended, January 31,2020
Service
Revenue ₱ 42,200.00
Less: operating Expenses

Salaries Expense ₱ 14,000
Rent Expense 1,500
Depreciation expense-Office
equipment 2,000
Bad Debt Expense 246
Total Expenses 24,046
Net Income ₱ 21,254
Exercise 2
Sherwin's Delivery Services
As of November 30,2019
ASSETS
Current Assets
Cash ₱ 90,000
Accounts Receivable ₱ 70,000
Less: All. for Doubtful Accounts 5,000 65,000
Prepaid Expense 30,000
Total Current Assets ₱185,000
Non-Current Assets
Land 160,000
Building 200,000
Less: Acc. Depreciation-Building 20,000 180,000
Total Non- Current Assets 340,000
Total Assets ₱525,000
26
LIABILITIES AND OWNER'S EQUITY
Liabilities
Accounts Payable ₱ 170,000
Total Liabilities ₱200,000
Owner's Equity
Sherwin's, Capital 300,000
add: Net Income 55,000
Total 355,000
Less: Drawings 30,000
Total Owners Equity 325,000
Total Liabilities and Owner's Equity ₱525,000
Exercise 3
General Journal
GJ-1
06- Cash 101 ₱ 200,000
Jan
Kan, Capital 301 ₱ 200,000
To record investment of capital
7 Office Equipment 151 33,000

Accounts payable 201 33,000
To record purchase of equip. on account
9 Supplies 121 19,500

Cash 101 19,500
To record purchase of supplies
13 Prepaid Insurance 131 12,000

Cash 101 12,000
To record advance payment of insurance
27
15 Accounts Receivable 111 50,000
Service Revenue 401 50,000
To record services rendered on acc.
16 Cash 101 40,000

Accounts Receivable 111 40,000
To record collection of services on account
20 Accounts payable 201 20,000

Cash 101 20,000
To record par. payment of equip.
22 Accounts receivable 111 30,000

Service Revenue 401 30,000
To record services rendered on acc.
23 Cash 101 15,000

Loans Payable 211 15,000
Borrowed from the bank.
31 Salaries expense 501 16,000

Cash 101 16,000
To record payment of salaries to employees
GJ-2
31 Drawings 311 ₱ 11,000
Cash 101 ₱ 11,000
To record withdrawals by the owner
28
Utilities Expense 512 2,500
Cash 101 2,500
To record payment of telephone bill
Supplies Expense 511 7,500

Supplies 121 7,500
To record supplies expense
GENERAL LEDGERS
Account Name: CASH

06-
Jan Investment of Capital GJ-1 ₱ 200,000 ₱ 200,000
9 Purchase of supplies GJ-1 ₱ 19,500 180,500
13 Payment for insurance GJ-1 12,000 168,500
16 Coll. for ser. rendered GJ-1 40000 208,500
20 Par. Payment for equip. GJ-1 20,000 188,500
23 loans from a Bank GJ-1 15,000 203,500
31 Payment of Salaries GJ-1 16,000 187,500
31 Withdrawal by the owner GJ-2 11,000 176,500
31 Payment of telephone bill GJ-2 2,500 174,000

15-
Jan Rendered services on account GJ-1 ₱ 50,000 ₱ 50,000
16 Collection of receivables GJ-1 40,000 10,000
22 Rendered services on account GJ-1 30,000 40,000
29
09-Jan purchase of supplies GJ-1 ₱ 19,500 ₱ 19,500
31 supplies expense GJ-2 7500 12,000
Account Name: Prepaid Insurance

13-Jan purchase of Insurance GJ-1 ₱ 12,000 12,000
31-Jan Adjustment GJ-3 1,000 11,000

07-Jan Purchase of equipment GJ-1 ₱ 33,000 ₱ 33,000
Account Name: ACCUMULATED DEPRECIATION-OFFICE EQUIPMENT

31-
Jan Depreciation of equipment GJ-3 ₱ 500.00 ₱ 500.00
07-Jan Pur. Of Equipment on acct. GJ-1 ₱ 33,000 ₱ 33,000
20 Partial payment to supplier GJ-1 20,000 13,000
Account Name: Loans Payable

23-Jan loans from the bank GJ-1 ₱ 15,000 ₱ 15,000
Account Name: KAN, CAPITAL

30
01-Jan Investment GJ-1 ₱200,000 ₱ 200,000
31 Closing GJ-4 52,500 252,500
31 Closing GJ-4 ₱ 11,000 241,500
Account Name: KAN, DRAWINGS

28-Jan Withdrawal GJ-2 ₱ 12,000 ₱ 12,000
31 Closing GJ-4 12,000 ₱ -
Account Name: INCOME AND EXPENSE SUMMARY

31-Jan Closing GJ-4 ₱ 80,000 ₱ 80,000
31 Closing GJ-4 27,500 52,500
31 Closing GJ-4 52,500 0
Account Name: SERVICE REVENUE

15-Jan service rendered on acct. GJ-1 ₱ 50,000 ₱ 50,000
22 service rendered on acct. GJ-1 30,000 80,000
31 Closing GJ-4 80,000 -


Payment of
31-Jan advertisement GJ-1 ₱ 16,000 ₱ 16,000
31 Closing ₱ 16,000 -
Account Name: SUPPLIES EXPENSE

31-Jan Payment of supplies GJ-2 ₱ 2,500 ₱ 2,500
31
31 Closing GJ-4 2,500 -

31-Jan Payment of telephone bill GJ-2 ₱ 7,500 ₱ 7,500
31 Closing GJ-4 7500 -
Account Name: INSURANCE EXPENSE

31-Jan expired insurance GJ-3 ₱ 1,000 ₱ 1,000
31 Closing GJ-4 ₱ 1,000 ₱ -
Account Name: DEPRECIATION EXPENSE

31-Jan Depreciation of asset GJ-3 ₱ 500 ₱ 500
31 Closing GJ-4 ₱ 500 -
32
January31,2020
Cash ₱ 174,000
Supplies 12,000
Loans payable 15,000
Kan, Capital 200,000
Kan, Drawings 11,000
supplies expense 2,500
Utilities Expense 7500
Total ₱ 308,000 ₱ 308,000
ADJUSTING ENTRIES
GJ-3
31-
Jan Depreciation Expense 152 ₱ 500
Accumulated Dep'n-Office Equipment 514 ₱ 500
To recognize the depreciated amount of
office equipment
31 Insurance Expense 131 1,000

Prepaid Insurance 513 1,000
To record expired portion of prepaid
insurance
33
January 31,2020
Cash ₱ 174,000
Supplies 12,000
Accumulated Depreciation-Office
Equipment 500
Kan, Drawings 11,000
Service Revenue 80000
Supplies expense 2,500
Insurance expense 1000
Depreciation expense 500
Total ₱ 308,500 ₱ 308,500

For the Month Ended, January 31,2020
Service Revenue ₱ 80,000.00
Less: operating Expenses

supplies expense 2,500
Insurance expense 500
Depreciation expense 1,000
Total Expenses 27,500
34
For the Month Ended, January 31,2020
Kan, Capital,4/30/2020 ₱ -
Initial Investment 200,000
Add: Net Profit 52,500
Total 252,500
Less:Kan, Drawing 11,000
Villa, Capital 05/31/2020 ₱ 241,500

Cash Flow Statement
January 31,2020
Cash Flow from Operating Activities:
Cash received from customers ₱ 40,000.00
Payment of supplies 19,500
Payment for Insurance 12,000
Payment of salaries 16,000
Payment for utilities 2,500
Total Cash from Operating Activities (10,000)
Cash Flow from Investing Activities
Payment to acquire Equipment 5,000 (5,000)
Investment made by the owner 200000
Cash Loan from the Banks 15,000
Payment for withdrawals by owner 11,000
Total Cash from Financing Activities 204,000
Increase in Cash 174,000
Cash Balance, January 31, 2020 0
Cash Balance, January 31,2020 174,000
35
Closing Entries
GJ-4
31-Jan Service Revenue 401 ₱ 80,000
Income and Expense Summary 601 ₱ 80,000
To close Revenue account
31 Income and Expense Summary 151 27,500

Salaries Expense 501 16,000
Supplies Expense 511 2,500
Insurance Expense 513 500
Deprecitaion Expense 514 1,000
To close Expenses
31 Income and Expense Summary 601 52,500

Kan, Capital 301 52,500
To close net income .
31 Kan, Capital 301 12,000

Kan, Drawings 311 12,000
To close owner's withdrawal

January 31,2020
Cash ₱ 174,000
Supplies 12,000
Accumulated Depreciation-Office
Equipment ₱ 500
Total ₱ 270,000 ₱ 270,000
36
Section: ________________________________________ Date: _____________________

Nature of Transactions in a Merchandising Business
Two accounting inventory systems of a merchandising business are: (1) periodic inventory method
and (2) perpetual inventory method The Periodic Inventory System is generally used when the
individual inventory items have small peso value. Under this method, the business maintains
temporary accounts like purchases, purchase returns, and purchase discounts. At the end of the
accounting period, these temporary accounts are used to determine the amount of inventory
available for sale.
On the other hand, the Perpetual Inventory System is generally used when the individual items
have relatively large values. The inventory account is continually updated for each inventory
transaction.
Learning Competency with code
Describes the nature of transactions in a merchandising business
ABM_FABM11- IVe-j -35
Activity 1
Direction: Answer the following questions (10 points)
1. What distinguishes a merchandising business from a service business? (3points)
Describe the operation of a merchandising business (5points)

2. Give two (2) examples of a merchandising business.
Activity 2
Direction: Complete (fill-out) the missing item in the formula/s below:
1 Beginning Inventory (BI) +Cost of Goods Purchased (COGP) = ?
37
_____________________________
2 Cost of goods available for sale (CGAS) - Ending Inventory (EI) = ?
_____________________________
3 Sales - Cost of Goods Sold (COGS) = ? ____________________
4 Gross Profit - Operating Expenses = ? ____________________
5 Cost of Goods Available for Sale (CGAS) - Cost of Goods Purchased

(COGP) = ? ____________________
Activity 3 Answer with True or False (5 points)

1 The balance of the merchandise inventory account at the beginning of the
period represents the cost of merchandise on hand at the time
2. The two inventory systems of accounting for merchandising business are periodic and
perpetual
3. If the seller is to absorb the cost of delivering the goods, the terms are stated
(free on board) shipping point.
4. If the merchandise purchased on account is returned, the buyer may inform
the seller of the details by issuing an invoice
5. The purchases returns and allowances account is treated as a deduction
from the amount initially recorded as Purchases
Reflection
In this activity, I learned that
______________________________________________________________________________
______________________________________________________________________________
__________________________________________________________________
References
https://wbbbb-ams.blogspot.com/2012/07/nature-of-merchandising-business.html
https://en.wikipedia.org/wiki/Merchandising
ANSWER KEY
ACTIVITY 1
38
1 Service Business
*sells or renders service to earn
*service based business
*simple accounting system
Merchandising Business
*sells goods at a mark-up to gain profits
*presence of inventory
*two ways accounting system involving inventory recording
Merchandising business operations includes purchasing, selling, collecting and

2 payment activities
The two method of its inventory accounting is designed depends on the bulk of
of its stocks of goods maintained held for sale
3 Examples-- grocery stores, pharmacy, car dealers, home depots, and more
ACTIVITY 2 ACTIVITY 3
1 Cost of Goods Available for Sale (CGAS) 1 True
2. Cost of Goods Sold (COGS) 2 True
3 Gross Profit 3 False
4. Net Income/(Loss) 4 False
5. Beginning Inventory 5 True
39
Section: ________________________________________ Date: _____________________

RECORDING TRANSACTIONS OF A MERCHANDISING
A journal entry is the next step in the accounting after analyzing business transactions. In this step,
all the general accounting transactions are recorded in general journal in a chronological order.
The journal is maintained essentially on the concept of double entry system of accounting, where
each transaction affects at least two accounts.
For businesses with repetitive transactions, just like in a merchandising business, the company
may use special journals. Special journals record transactions of a specific type. The four special
journals are cash receipts journal, cash disbursements journal, purchases journal and sales journal.

Records transactions of a merchandising business in the general and special journals
(ABM_FABM_11-IVe-j-36)
Activity 1
Perpetual Inventory Recording System of a Merchandising Business
The following Chart of Accounts are used by Lourd Brothers Trading Company
Store using the Perpetual Method
101 Cash 400 Sales

110 Accounts Receivable 410 Sales Discounts
120 Supplies 420 Sales Returns and Allowances
130 Merchandise Inventory 500 Cost of Sales
140 Office Equipment 610 Salaries Expense
210 Accounts Payable 620 Freight Out
220 Notes Payable 630 Advertising Expense
40
310 Lopez, Capital 640 Rent Expense
320 Lopez, Drawings 650 Utilities Expense
330 Income Summary
Journalize the following transactions:

Lourd Brothers Trading Company’s transactions for March 2020 were as follows:
1 The business registered as a single proprietorship and Jaynielle Lopez invested P40,000
2 Bought computer equipment for P10,000 cash
Bought merchandise on account from Andrew Supplies Company, P15,900 with

terms: 2/10, n/30
3 Bought office supplies for P700
4 Sold merchandise on account to LB Leverage Company P15,200 FOB Destination, terms: 2/10,
n/30.Cost of merchandise P12,160
5 Paid P200 freight for March 4 sale
6 Received credit memo from Andrew Supplies Company for merchandise return, P300
11 Paid Andrew Supply Company

13 Collected from LB Leverage Company
14 Bought merchandise from E Perol Enterprises, P13,400
15 Paid salaries of P1,500
16 Borrowed money from CIM Bank, signed a promissory note for P12,000
17 Received refund from a supplier on cash purchase on March 14, P500
18 Bought merchandise from Mia Lovella Distributors, P14,200 FOB Shipping point ,
terms: 2/10, n/30
20 Paid freight on March 18 purchase, P700
23 Sold merchandise to Foggia’s Merchandise for P16,400. Cost of merchandise:P12,000
26 Bought merchandise from My Souki, P12,300
27 Paid Mia Lovella Distributors on March 18 purchase, P9,000 No allowed discount on
partial payment
28 Jaynielle Lopez withdrew cash from the business, P2,008
29 Made refund to Foggia’s Merchandise for a defective merchandise, P900
41
30 Sold Merchandise to Collete’s Creations, P13,700, with terms 2/10, n/30. Cost of
merchandise:P9,000
Paid the following: Advertising P1,000, Utilities, P400, Rent P3,500, Salaries
P1,500
General Journal- PERPETUAL METHOD
GJ-1
Date Account Title and Explanation Ref Debit Credit
01-Mar
42
5
11
13
14
43
GJ-2
15
16
17
18
20
23
44
26
27
28
29
30
45
GJ-3
30
Activity 2
The following Chart of Accounts are used by Lourd Brothers Trading Company
using the
Periodic Method
101 Cash 401 Sales
103 Office Supplies 420 Sales Returns and Allowances
130 Inventory 501 Purchases
104 Computer Equipment 502 Purchases Returns and Allowances
201 Accounts Payable 503 Purchase Discounts
202 Notes Payable 504 Freight In
301 Lopez, Capital 605 Salaries Expense
302 Lopez, Drawing 601 Freight Out
330 Income Summary 602 Advertising Expense
603 Utilities Expense
604 Rent Expense
Journalize the following transactions:

terms: 2/10, n/30
46
4 Sold merchandise on account to LB Leverage Company P15,200 FOB Destination, terms:
2/10, n/30.Ref. SI#0001
terms: 2/10, n/30
23 Sold merchandise to Foggia’s Merchandise for P16,400.
partial payment
30 Sold Merchandise to Collete’s Creations, P13,700, with terms 2/10, n/30.Ref. SI#0002
P1,500
General Journal- PERIODIC METHOD
GJ-1
47
48
49
50
51
Activity 3
Direction:
Record the transactions of Lourd Brothers Trading Company in the Special Journals .
terms: 2/10, n/30
4 Sold merchandise on account to LB Leverage Company P15,200 FOB Destination, terms:
2/10, n/30.Ref. SI#0001
terms: 2/10, n/30
23 Sold merchandise to Foggia’s Merchandise for P16,400.
partial payment
30 Sold Merchandise to Collete’s Creations, P13,700, with terms 2/10, n/30.Ref/. SI#0002
52
P1,500
Sales Journal
Date Account Debited Invoice No. Ref Dr.Accounts
Receivable &
Cr. Sales
2020
March 4 0001
30 0002
Cash Receipts Journal

Date Account Re Dr. Cr. Accounts Cr. Cr. Other
Credited f Cash Receivable Sales Accounts
March
1
13
16
17
23
Purchases Journal
53
Account Dr. Merchandise Inventory
Date Credited Terms Ref Cr. Accounts Payable
2020
March 2
18
Cash Payments Journal

Check Account Dr. Accounts Dr. Other Cr.
Date No. Debited Ref Payable Accounts Cash
2020
March
2
3
5
11
14
15
20
26
27
28
29
30
General Journal
54
GJ-1
2020
March 6
Reflection
In this activity I learned that
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________
Reference https://www.myaccountingcourse.com/accounting-dictionary/special-journal
Answer Key
Activity 1
Problem Activity 1
General Journal- PERPETUAL METHOD
GJ-1
01-Mar Cash 101 P40,000
Lopez, Capital 301 P40,000
Investment of Capital
2 Computer Equipment 104 10,000
Cash 101 10,000
55
Purchase of Equipment
2 Merchandise Inventory 501 15,900
Accounts Payable 201 15,900
Purchase of Inventory on account
3 Office Supplies 103 700
Cash 210 700
Purchase of Supplies
Sales 401 15,200
Sale of Merchandise
Cost of Sales 500 12,160
Merchandise Inventory 130 12,160
Cost of merchandise sold.
5 Freight out 601 200
Cash 101 200
Payment of freight
6 Accounts payable 201 300
Merchandise Inventory 502 300
To record returned inventory
56
11 Accounts Payable 201 15,600
Cash 101 15,288
Payment of Merchandise
13 Cash 101 14,896
Sales Discount 402 304
Cash 101 13,400
Purchase of goods
GJ-2
15 Salaries Expense 605 1,500
Cash 101 1,500
Payment of Salary
16 Cash 101 12,000
Notes Payable 202 12,000
Borrowed money from the bank
17 Cash 101 500
Return of inventory
57
Purchase of goods on account
20 Merchandise Inventory 504 700
Cash 101 700
Payment of freight
23 Cash 101 16,400
Sales 401 16,400
Sale of merchandise
Cost of Merchandise 500 12,000
Cost of goods sold
Cash 101 12,300

Purchase of Inventory
Cash 101 9,000
Partial payment of merchandise bought
28 J. Lopez, Drawing 302 2,008
Cash 101 2,008
Withdrawal from the owner
58
29 Sales returns and Allowances 403 900
Cash 101 900
Return of goods from Foggia’s

Merchandise
Cost of Sales 500 780
Sales 101 13,700
Sale of merchandise
Cost of Sales 500 9,000
Cost of merchandise sold
GJ-3
30 Advertising Expense 602 1,000
Utilities Expense 603 400
Rent Expense 604 3,500
Cash 630 6,400
Payment of expenses
Activity 2
59
Journal Entries-PERIODIC METHOD
ANSWER KEY
GJ-1
01-Mar Cash 101 P40,000
Lopez, Capital 301 P40,000
Initial contribution from the owner
2 Computer Equipment 104 10,000
Cash 101 10,000
2 Purchases 501 15,600
Purchase of merchandise on account.
3 Office Supplies 103 700

Cash 210 700
Purchase of supplies.
Sales 401 15,200
Sold merchandise to customers.
Cash 101 200
60
Payment of freight.
Purchase Returns and Allowances 502 300
To record return of merchandise to

supplier
Cash 101 15,288
Purchase Discount 503 312
Payment of Merchandise
13 Cash 101 14,896
14 Purchases 501 13,400
Cash 101 13,400
Purchase of merchandise.
GJ-2
Cash 101 1,500
Payment of salary.
16 Cash 101 12,000
61
Borrowed money from the bank
17 Cash 101 500
Returned goods to supplier.
18 Purchases 501 14,200
Purchase of goods on account.
20 Freight In 504 700
Cash 101 700
Payment of freight
23 Cash 101 16,400
Sales 401 16,400
Sold goods to customer.
26 Purchases 501 12,300
Cash 101 12,300
Purchase of goods.
Cash 101 9,000
Partial payment of merchandise bought
62
28 J. Lopez, Drawing 302 2,008
Cash 101 2,008
Withdrawal of capital
29 Sales returns and Allowances 403 900
Cash 101 900
Return of goods from Foggia’s

Merchandise
Sales 101 13,700
Sale of merchandise
GJ-3
Cash 630 6,400
Payment of expenses 101
63
Activity 3
Cash Receipts Journal
Date Account Credited Ref Dr. Cash Cr. Accounts Receivable

Cr. Sales Cr. Other Accounts
March 1 Lopez, Capital ₱20,000 ₱200,000

13 LB Leverage Company 14,896 ₱15,200 304
16 CIM Bank/Note Payable 12,000 12,000
17 E. Perol Enterprises 500 500
23 Foggia's Merchandise 16,400 ₱16,400
Cash Payments Journal

Date Check No. Account Debited Ref Dr. Accounts Payable
Dr. Other Accounts
Cr. Cash
2020
March 2 Equipment 10000 10000
3 Supplies 700 700
5 Freight-out 200 200
11 Andrew Supply 15600 312 15288
14 E.Perrol Enterprises 13400 13400
15 Salaries 1500 1500
20 Freight-in 700 700
26 My Souki 12300 12300
27 Mia Lovella Distributors 9000 9000
28 Lopez, witdrawal 2008 2008
29 Foggia's Merchandise 900 900
30 Advertising 1000 1000
Utilities 400 400
Rent 3500 3500
Salaries 1500 1500
64
Sales Journal
Dr.Accounts
Receivable &
Date Account Debited Invoice No. Ref Cr. Sales
2020
March 4 LB. Leverage Company 0001 ₱15,200
30Collette's Creations 0002 13,700
Purchases Journal
Dr.
Merchandise
Inventory Cr.
Accounts
Date Account Credited Terms Ref Payable
2020
March 2 Andrew Supplies Company 2/10 n/30 ₱15,900
18 Mia Lovella Distributors 2/10 n/30 14,200
General Journal
GJ-1
2020
March 6 Purchase Returns and Allowances 300
Accounts Payable 300
65
Section: ________________________________________ Date: _____________________

Posts Transactions in the General Ledgers and Subsidiary Ledgers

Merchandising entities may use either of the following inventory systems:
1. Perpetual System--Detailed records of the cost of each item are maintained, and the cost of each
item sold is determined from records when the sale occurs. At the end of the period, no entry is
made except to adjust inventory for losses.
2. Periodic System--Cost of goods sold is determined only at the end of an accounting period. The
cost of goods sold must be computed, meaning, the cost of goods sold on hand at the beginning of
the accounting period must be determined.
In recording transactions of a merchandising business, a general ledger serves as a central

repository for accounting data transferred from all subsidiary ledgers like the accounts receivable,
accounts payable, cash, fixed assets, and purchases. Each account maintained is known as ledger
accounts and the collection of all these accounts is known as the general ledger.
Posts transactions in the general and subsidiary ledgers
ABM_FABM11- IVe-j -37
Directions:
Activity 1 Journalize the transactions using the Periodic Inventory
System
Activity 2 Post to the General Ledger
Activity 3 Prepare for the Cost of Goods Sold.
66
Chart of Accounts
101 Cash 400 Sales
120 Supplies 420 Sales Returns and Allowances
130 Inventory 510 Purchases
140 Office Equipment 520 Purchases Discounts
Purchases Returns and

210 Accounts Payable 530 Allowances
220 Notes Payable 540 Freight In
310 Villa, Capital 610 Salaries Expense
320 Villa, Drawings 620 Freight Out
330 Income Summary 630 Advertising Expense
640 Rent Expense
650 Utilities Expense
Serenity Villa opened SV Merchandising Store. The following transactions occurred during the
month of July 2019:
July
1 Villa invested P128,000 in the business.
Acquired computer set for P21,000. Villa paid 5,000 and issued a promissory note for the
remaining balance.
2 Acquired supplies for cash, P1,200.
3 Purchase P81,900 of merchandise from LOWKEY company on account.
Terms: FOB Destination, 2/10, n/30.
5 Sold merchandise to THORE for P48,600 on account.
Terms: FOB Destination, 2/10, n/30.
The cost of merchandise sold was P28,880.
Paid P550 freight on the same day.
7 Received collections from customers billed on sales of P48,600 on July 5.
9 Returned merchandise purchased from LOWKEY Company, P380.
67
11 Paid the amount due from July 3 transaction.
13 Purchase merchandise P12,300 and additional supplies P450 for cash.
15 Paid 15th month salary, P8,000.
16 Received refund for poor quality of merchandise from a supplier on cash purchase
made on July 13, P870.
18 Sold merchandise to various customers, P24,300.
The cost of merchandise is P16,500.
19 Purchase 15,800 of merchandise from Eleonor Shop.
FOB Shipping point, terms, 2/10, n/30.
23 Receive sales returns, P3,800 from various customers. Its cost is P2,900.
24 Borrowed money from Town Bank, signed promissory note for P13,500.
24 Paid freight on July 21 purchase, P580.
26 Sold merchandise on account for P36,800 terms, 2/10, n/30 FOB Destination. The
merchandise sold had a cost of P21,300.
28 Serenity Villa withdrew cash from the business, P9,000.
30 Paid Eleonor Shop in full.
31 Paid Salary to employees, P8,000.
31 Paid News Hub for 1 month advertisement of the store, P1,580.
Paid Rent and Utilities expenses for the month, P2,800 and P700 respectively.
31 Inventory count at the end of the month: P48,480.

GJ-1
1-Jul
68
5
11
GJ-2
13
15
16
69
18
19
23
24
24
26
GJ-3
26
70
28
30
31
31
31
General Ledger- PERIODIC METHOD
Account Name: CASH

01-Jul GJ-1
2
2
5
7
11
13
15
71
16
18
23
24
24
28
30
31
31
31
72
Account Name: NOTES PAYABLE
Account Name: VILLA, CAPITAL
73
Account Name: VILLA, DRAWINGS
Account Name: INCOME SUMMARY
74
Account Name: SALES
Account Name: SALES DISCOUNT
Account Name: SALES RETURNS AND

ALLOWANCES
75
Account Name: PURCHASES
Account Name: PURCHASES DISCOUNT
76
Account Name: PURCHASES RETURNS AND ALLOWANCES
Account Name: FREIGHT IN
Account Name: FREIGHT OUT
77
Account Name: ADVERTISING EXPENSE
Account Name: RENT EXPENSE
78
Reflection
In this activity I learned that

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
__________________________________________________________
Reference
Basic Financial Accounting and Reporting by Win Ballada, CPA
ANSWER KEY
Problem Activity 1
GJ-1
01-Jul Cash 101 P128,000

Villa, Capital 310 P128,000
Initial investment
Office Equipment 140 21,000

Cash 101 5,000
2 Supplies 120 1,200

Cash 101 1,200
Purchase of supplies.
3 Purchases 510 81,900

Purchases from Lowkey company.
Terms:2/10;n/30, FOB Destination
79
Sales 400 48,600
Sold merchandise to Thore
Terms:2/10;n/30, FOB Destination

Cash 101 550
Payment of freight
7 Cash 101 47,628

Collection from Thore.

To record returned inventory

Cash 101 79,890
Purchase Discount 520 1,630
Payment Lowkey company
GJ-2
13 Purchases 510 12,300
Supplies 120 450
Cash 101 12,750
Purchases of goods and supplies

Cash 101 8,000
Payment of salary.
16 Cash 101 870

Return of goods.
80
18 Cash 101 24,300
Sales 400 24,300
Sold goods to various customers.
19 Purchases 510 15,800

Purchase of goods from Eleonor shop
Terms;2/10,n/30, FOB shipping point
23 Sales returns and Allowances 420 3,800

Cash 101 3,800
Return of goods from customers
24 Cash 101 13,500

To record borrowed money
24 Freight In 540 580

Cash 101 580
Payment of freight

Sales 400 36,800
Sale of merchandise
28 Villa, Drawings 320 9,000

Cash 101 9,000
Withdrawal of capital

Cash 101 15,800
Payment to Leonor.
GJ-3
Cash 101 8,000
Payment of salary
81
Cash 101 1,580
Payment of Advertisement
31 Rent Expense 640 2,800

Cash 101 3,500
Payment of expenses
Problem Activity 2 ANSWER KEY
General Ledger- PERIODIC METHOD
Account Name: CASH

01-Jul Investment of Capital GJ-1 ₱128,000 ₱128,000
2 Purchase of Equipment GJ-1 5,000 123,000
2 Purchase of supplies GJ-1 1,200 121,800
5 Payment of freight GJ-1 550 121,250
7 Collection of receivable GJ-1 47,628 168,878
11 Payment of merchandise GJ-1 79,890 ₱88,988
13 Purchase of merchandise GJ-2 12,750 ₱76,238
15 Payment of salary GJ-2 8,000 ₱68,238
16 Return of merchandise GJ-2 870 ₱69,108
18 Sale of merchandise GJ-2 24,300 ₱93,408
23 Return of merchandise GJ-2 3,800 ₱89,608
24 Borrowed money GJ-2 13500 ₱103,108
24 Payment of freight GJ-2 580 ₱102,528
28 Withdrawal GJ-3 9,000 ₱93,528
30 Payment of merchandise GJ-3 15,800 ₱77,728
31 Payment of salary GJ-3 8,000 ₱69,728
82
31 Payment of Advertisement GJ_3 1,580 ₱68,148
31 Payment of expenses GJ_3 3,500 ₱64,648
05-Jul Sale of merchandise GJ-1 ₱48,600 ₱48,600

7 Collection of receivable GJ-1 48,600 ₱-
02-Jul Purchase of supplies ₱1,200 1,200

13 Purchase of inventory 450 1,650
02-Jul Purchase of equipment GJ-1 ₱21,000 ₱21,000
83
03-Jul Purchase of inventory GJ-1 ₱81,900 ₱81,900

9 Returned inventory GJ-1 380 ₱81,520
11 Payment of merchandise GJ-1 81,520 ₱-
19 Purchase of inventory GJ-2 15,800 ₱15,800
30 Payment of merchandise GJ-3 15,800 ₱-
Account Name: NOTES PAYABLE
02-Jul Purchase of equipment GJ-1 ₱16,000.00 ₱16,000.00

24-Jul Borrowed money GJ-2 ₱13,500 ₱29,500
Account Name: VILLA, CAPITAL
01-Jul Investment GJ-1 ₱128,000 ₱128,000

31 Closing GJ-4 24,078 ₱152,078
31 Closing GJ-4 9,000 ₱143,078
Account Name: VILLA, DRAWINGS
84
28-Jul Withdrawal GJ-3 ₱9,000 ₱9,000

31 Closing GJ-4 9,000 ₱-
Account Name: INCOME SUMMARY
31 Closing GJ-4 ₱104,928 ₱104,928
31 Closing GJ-4 59,220 ₱45,708
31 Closing GJ-4 21,630 ₱24,078
GJ-4 24,078 ₱-
Account Name: SALES
05-Jul Sale of merchandise GJ-1 ₱48,600 ₱48,600

31 Closing GJ-4 109,700 ₱-
85
Account Name: SALES DISCOUNT
07-Jul Collection of receivable GJ-1 972 ₱972

31 Closing GJ-4 972 ₱-
Account Name: SALES RETURNS AND

ALLOWANCES
23-Jul Return of merchandise GJ-2 ₱3,800 3,800

31 Closing GJ-4 3,800 0
Account Name: PURCHASES
03-Jul Purchase of inventory GJ-1 ₱81,900 ₱81,900

31 Closing GJ-4 61,520 48,480
86
Account Name: PURCHASES DISCOUNT
11-Jul Payment of merchandise GJ-1 ₱1,630 ₱1,630

31 Closing GJ-4 1,630 ₱-
Account Name: PURCHASES RETURNS AND ALLOWANCES
09-Jul Return of inventory GJ-1 ₱380 ₱380

16 Return of inventory GJ-2 870 ₱1,250
31 Closing GJ-4 1,250 ₱-
Account Name: FREIGHT IN
24-Jul Payment of freight GJ-2 ₱580 ₱580
15-Jul Payment of salary GJ-1 ₱8,000 ₱8,000

31 Payment of salary GJ-3 8,000 16,000
31 Closing GJ-4 16,000 0
87
Account Name: FREIGHT OUT
05-Jul Payment of freight GJ-1 ₱550 ₱550

Account Name: ADVERTISING EXPENSE
31-Jul Payment of advertisement GJ-3 ₱1,580 ₱1,580

31 Closing GJ-4 1580 ₱-
Account Name: RENT EXPENSE
31-Jul Payment of expense GJ-3 ₱2,800 ₱2,800

31 Closing GJ-4 2,800 ₱-
88
31-Jul Payment of Expense GJ-3 ₱700 ₱700

Problem Activity 3 ANSWER KEY
SV Merchandising Store
Cost of Goods Sold Schedule
For the month ended July 31,2019
Cost of Goods Sold

Merchandise Inventory, 7/01/19 0
Purchases 110,000
Less: Purchase Discounts 1,630
Purchase Returns and Allowances 1,250 2,880
Net Purchases 107,120
Add: Freight In 580
Goods Available for Sale 107,700
Less: Merchandise Inventory. 7/31/19 48,480
Cost of Goods Sold 59,220
89
Section: ________________________________________ Date: _____________________

Accounting Cycle of a Merchandising Business
The first step in the summarizing part in the accounting process, after recording and classifying, is
the preparation of trial balance. A trial balance is prepared to check the equality of debits and
credits. A trial balance is a step in the accounting process that shows the balances of accounts
which also aids in the preparation of financial statements.
In the preparation of trial balance we get the balances from the ledger balances then from the trial
balance we move the balances of the accounts to their respective financial statements. A careful
transfer of account balances from the ledger to the trial balance must be observed. Errors such as
incorrectly copying the amounts from ledger to trial balance, placing the amount in the incorrect
column of the trial balance and even omitting an account in the trial balance may still result in a
balanced trial balance. Remember that a balanced trial balance does not mean that it is free from
errors.

1. Prepares a trial balance (ABM_FABM11-IVe-j-38)
90
Activity 1: CHECK THE BALANCE
Direction: Given is the trial balance of Kaydee Lim Merchandising Company. The company uses
a perpetual inventory system. Assuming that there are no abnormal balances, identify whether each
account title is in its correct debit or credit column. Put a check mark (√) if the balance is correct;
otherwise, cross out the amount and write it in its proper column. Prepare the corrected trial balance
using the space provided below.
KAYDEE LIM MERCHANDISING COMPANY
Trial Balance
December 31, 2019
Account Titles Dr Cr Answer
Cash ₱ 645,300
Merchandise Inventory 513,300
Store Supplies 10,000
Furniture and Fixtures 80,000
Equipment 450,000
Kaydee Lim, Capital 1,500,000
Kaydee Lim, Drawings 50,000
Sales 610,000
Sales Returns and Allowances 5,000
Sales Discount 2,400
Advertising Expense 1,500
Freight Out 5,000
91
Trial Balance
Account Titles Dr Cr
92
Activity 2: COMPLETE ME
Direction: Given is an incomplete trial balance of Averill Merchandising using the periodic
inventory system. Fill in the missing accounts by using the following additional information taken
from the ledger account balances and compute for the total balance.
Accounts Receivable ₱ 19,700 Purchase Discount ₱ 1,116
Freight In 850 Freight Out 650
Notes Payable 25,000 Averill, Capital 150,000
Advertising Expense 2,000 Cash 60,532
Averill, Drawings 5,000 Equipment 30,000
Sales 71,900 Sales Discount 714
Sales Returns and Allowances 800 Store Supplies 750
Purchase Returns and Allowances 1,080
AVERILL MERCHANDISING
Trial Balance
December 31, 2019
Cash
750
Equipment
Averill, Capital
Averill, Drawings
71,900
Sales Returns and Allowances
93
Purchases 109,000
Purchase Returns and Allowances
850
Advertising Expense

Rent Expense 2,500
Total
Activity 3: PREPARING TRIAL BALANCE (PERIODIC INVENTORY SYSTEM)

Direction: Using the information from the ledger account balances of Mae Merchandising for the
month of July 2019, prepare the trial balance for Periodic Inventory System using the space
provided below.
Cash ₱ 45,180 Purchases 70,900
Purchase Returns and
Accounts Receivable 24,700 880
Allowances
Store Supplies 800 Purchase Discount 320
Equipment 15,000 Freight In 850
Accounts Payable 11,000 Salaries Expense 5,000
Notes Payable 15,000 Utilities Expense 700
Mae, Capital 80,000 Freight Out 650
Mae, Drawings 5,000 Rent Expense 2,500
Sales 67,200 Advertising Expense 2,000
Sales Returns and Allowances 800
94
Sales Discount 320
Trial Balance
95
Activity 4: PREPARING TRIAL BALANCE (PERPETUAL INVENTORY SYSTEM)
Direction: Using the information from the ledger account balances of Mae Merchandising for the
month of July 2019, prepare the trial balance for the Perpetual Inventory System in a two-column
columnar.
Cash ₱ 45,180 Sales 67,200
Accounts Receivable 24,700 Sales Returns and Allowances 800
Merchandise Inventory 17,830 Sales Discount 320
Store Supplies 800 Cost of Goods Sold ₱ 52,720
Equipment 15,000 Salaries Expense 5,000
Accounts Payable 11,000 Utilities Expense 700
Notes Payable 15,000 Freight Out 650
Mae, Capital 80,000 Rent Expense 2,500
Mae, Drawings 5,000 Advertising Expense 2,000
Trial Balance
96
Rubrics for Scoring Activity 3 and Activity 4
Criteria Excellent Good Fair NI
(10) (8) (5) (2)
Concept Shows clear Understands Do not have Do not have a
understanding of concepts in complete good
the concepts in preparing trial understanding understanding of
preparing a trial balance very of the concepts the concept in
balance. well with few in preparing preparing trial
errors. trial balance. balance.
Structure Observes proper Observes Observes Did not
listing of account proper listing proper listing observed proper
titles and amounts of account of account listing of
are in its proper titles with 1-2 titles with 3-4 account titles
debit and credit amounts that amounts that and amounts and
column. With are not in its are not in its not in its proper
proper heading. proper debit proper debit debit and credit
and credit and credit column.
column. column.
Without proper
With proper With proper heading.
heading. heading.
97
Computations Obtained equal Obtained equal Obtained Obtained
and correct debit debit and unequal debit unequal debit
and credit credit balances and credit and credit
balances. but are balances with balances with 5
incorrect due 3-4 errors. or more errors.
to 1-2 errors.
Reflection
Answer what is asked.
In your own words, what are the things you need to remember in preparing a trial balance?
References
Teaching Guide for Senior High School. (2016) FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS AND MANAGEMENT 1. Published by Commision on Higher Education
Tugas, Florenz, et.al. (2016) FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND
MANAGEMENT 1. Vibal Group, Inc.
Answer Key
Activity 1: CHECK THE BALANCE (20 points) 1 point per account title and 5 points for
total credit and debit balance
Trial Balance
December 31, 2019
Account Titles Dr Cr Answer
98
Cash ₱ 645,300 √
Accounts Receivable 10,000 ₱ 10,000
Merchandise Inventory 513,300 √
Store Supplies 10,000 √
Furniture and Fixtures 80,000 80,000
Accounts Payable 265,000 265,000
Kaydee Lim, Capital 1,500,000 1,500,000
Kaydee Lim, Drawings 50,000 50,000
Sales 610,000 √
Sales Returns and Allowances 5,000 √
Sales Discount 2,400 √
Cost of Goods Sold 452,500 452,500
Salaries Expense 30,000 √
Advertising Expense 1,500 √
Freight Out 5,000 5,000

Trial Balance
December 31, 2019
Cash ₱ 645,300
99
Furniture and Fixtures 80,000
Kaydee Lim, Capital 930,000
Kaydee Lim, Drawings 50,000
Sales 610,000
Freight Out 5,000
₱ 1,805,000 ₱ 1,805,000
Activity 2: COMPLETE ME (20 points)

AVERILL MERCHANDISING
Trial Balance
December 31, 2019
Dr Cr
Cash 60,532
Store Supplies 750
Equipment 30,000
Averill, Capital 150,000
Averill, Drawings 5,000
100
Sales 71,900
Sales Discount 714
Purchases 109,000
Purchase Returns and Allowances 1,080
Purchase Discount 1,116
Freight In 850
Freight Out 650
Rent Expense 2,500
Total ₱ 258, 196 ₱ 258.196
Activity 3: PREPARING TRIAL BALANCE (PERIODIC INVENTORY SYSTEM)

MAE MERCHANDISING
Trial Balance
July 31, 2019
Cash ₱ 45,180
Store Supplies 800
Equipment 15,000
101
Mae, Capital 80,000
Mae, Drawings 5,000
Sales 67,200
Sales Discount 320
Purchases 70,900
Purchase Returns and Allowances 880
Purchase Discount 320
Freight In 850
Freight Out 650
Rent Expense 2,500
Total ₱ 174,400 ₱ 174,400
Activity 4: PREPARING TRIAL BALANCE (PERPETUAL INVENTORY SYSTEM)

MAE MERCHANDISING
Trial Balance
July 31, 2019
Cash ₱ 45,180
Store Supplies 800
Equipment 15,000
102
Mae, Capital 80,000
Mae, Drawings 5,000
Sales 67,200
Sales Discount 320
Freight Out 650
Rent Expense 2,500
Total ₱ 173,200 ₱ 173,200
103
Section: ________________________________________ Date: _____________________

At the end of the accounting period, some accounts would require updating. Adjusting entries are
journal entries that reflect this kind of updating. Adjustments for these accounts are for income
and expenses to be reported in the correct period and to ensure that the accrual-basis of accounting
and the time period principle are followed. This ensures that income is recognized in the period in
which they are earned and that expenses are recognized in the period in which they are incurred.
In doing the following activities, you will be able to answer the questions such as “What
appropriate account titles are to be used in recording adjusting entries for each adjustment
transactions?”, “How will you compute for the amount needed for each adjusting entry?” and
“What method of recording are you going to use for each adjustment transaction?”.
The learner prepares adjusting entries. (ABM_FABM11-IVe-j-39)
Activity 1: INCREASE, DECREASE, NO EFFECT

Direction: Identify the effect of each adjusting entry to the major accounts after the adjustments
are made. Place (I) to indicate that the account increased, (D) to indicate that the account decreased
and (NO) if there is no effect.
Owner’s Equity
Adjustment Asset Liability
Income Expense
1. Accrued Income
2. Accrued Expense
3. Accumulated Depreciation
4. Prepaid Expense – Asset Method
104
5. Prepaid Expense – Expense Method
Activity 2: CROSSWORD PUZZLE

Direction: Fill in the crossword puzzle with the appropriate account title used for the adjusting
entry from the following adjustment data below. Word spacing not included.
3
5
4
4 2 1
Across (Debited Account) Down (Credited Account)

1. To recognize expired portion of supplies.
105
2. To recognize expired portion of rent.
3. To record depreciation for the month.
4. To record accrued salaries expense.
5. To record bad debts.
Activity 3: FILL IN THE BOX

Direction: Analyze the following independent transactions and fill in the box the appropriate
adjusting entry for the end of the month. Show your computation.
Transaction Debit Account Credit Account Amount
Title Title
1. Supplies debited to the store
supplies account during the year, ₱
20,750. As of December 31, 2020,
₱ 5, 250 is unused.
2. On November 15, 2020, DRF
Company subscribed to the
Techcron internet services. The
monthly fee of ₱ 2,000 is paid
every 15th of the month. The
payment on December 15, 2020
has been recorded by a debit to
Utilities Expense and credit to
Cash for ₱ 2,000.
3. On December 1, 2019, Insulife
Insurance Company received
₱36,600 from ABS Company as
insurance premium for one year.
The bookkeeper recorded the
payment with a debit to Cash and
credit to Unearned Insurance
Income for ₱ 36,600.
4. On December 1, 2019, ABS
Company issued a ₱ 240,000
promissory note to its supplier,
EMC Trading. The note bears an
annual interest rate of 12%. No
interest or principal has been made
until the due date. ABS Company
prepares its monthly financial
statements.
5. On December 1, 2020, KAC
Company paid ₱ 24,000 to ProLife
106
Insurance Company as insurance
premium for a year. The
bookkeeper recorded the payment
with a debit to Prepaid Insurance
and credit to Cash for ₱ 24,000.
Activity 4: PREPARE ADJUSTING AND ADJUSTED TRIAL BALANCE

Direction: Given is an unadjusted trial balance of Mema Company for the first month of its
operation. Use the following adjustments prepare the adjusting entries with explanation and plot
the adjustments and the adjusted trial balance on the space provided below.
1. Salaries incurred in December but which remain unpaid as of December 31 amounting to ₱
7,000.
2. Store supplies used for the month of December totaled ₱ 2, 300.
3. Store equipment is estimated to have salvage value of ₱ 5,000 and useful life of five years.
4. Rent paid for 6 months amounting to ₱ 45,000.
5. Electric bill received for the month of December amounting to ₱ 6,000.
6. 10% of the Accounts Receivable is deemed uncollectible.
Mema Company
December 31, 2020
Cash ₱ 735,500
Prepaid Rent 45,000
Store Equipment 50,000
Accumulated Depreciation – Store Equipment 0
Mema, Capital 1,105,000
Mema, Drawings 50,000
107
Sales 835,745
Freight Out 4,500
Total ₱ 2,239,520 ₱ 2,239,520
General Journal
Date Account Titles Dr Cr
108
Adjustments Adjusted Trial Balance
Account Titles
Dr Cr Dr Cr
109
Rubrics for Scoring
Criteria Excellent Good Fair NI
1. CONCEPT Shows clear Understands Do not have Do not have a
(10 points) understanding principles in complete good
of the principles preparing understanding understanding of
in preparing adjusting entries of the the principles in
adjusting entries and adjusted principles in preparing
and adjusted trial balance preparing adjusting entries
trial balance. very well with adjusting and adjusted
few errors. entries and trial balance.
adjusted trial
balance
110
10 8 4
6
2. PREPARING Used Used Used some Failed to use

ADJUSTING appropriate appropriate account titles appropriate
ENTRIES account titles account titles for that are account titles for
(18 points) for each entry each entry with inappropriate each entry and
with correct some incorrect with some computed
computed computed entries and balances are
balance plotted balances but have incorrect incorrect.
properly in its plotted properly computed
(7 or more
debit and credit in its debit and balances
mistakes)
column. credit column.
(4-6 mistakes)
(1-3 mistakes)
15
18
11
8
3. ADJUSTED Observes proper Observes proper Observes Did not
TRIAL listing of listing of proper listing observed proper
BALANCE account titles account titles of account listing of
(27 points) and amounts are with 1-3 titles with 4-6 account titles
in its proper amounts that are amounts that and amounts and
debit and credit not in its proper are not in its not in its proper
column. debit and credit proper debit debit and credit
Obtained equal column. and credit column.
and correct Obtained equal column. Obtained
debit and credit debit and credit Obtained unequal debit
balances. balances but are unequal debit and credit
incorrect due to and credit balances with 7
1-3 errors balances with or more errors.
4-6 errors.
24 18
27
21
111
Reflection
In your own words, what are the things you need to remember in preparing adjusting entries?
References
Answer Key
Activity 1: INCREASE, DECREASE, NO EFFECT (20 points)
Owner’s Equity
Adjustment Asset Liability
Income Expense
1. Accrued Income I NO I NO
2. Accrued Expense NO I NO I
3. Accumulated Depreciation D NO NO I
4. Prepaid Expense – Asset Method D NO NO I
5. Prepaid Expense – Expense Method I NO NO D
112
Activity 2: CROSSWORD PUZZLE (10 points)
Across (Debited Account) Down (Credited Account)
1 Supplies Expense Supplies
2 Rent Expense Prepaid Rent
3 Depreciation Expense Accumulated Depreciation
4 Salaries Expense Salaries Payable
5 Doubtful Accounts Allowance for Doubtful Accounts
Activity 3: FILL IN THE BOX (30 points) 1 check per box and 3 point per correct computation
Credit
Debit Account
Account Amount Computation
Title
Title
Total Store Supplies 20,750
1. Store Store
Supplies ₱ 15,500 Less: Unused Store Supplies 5,250
Supplies
Expense Used Store Supplies 15,500
Accrued
Used internet service from Dec. 16 – Dec. 31
2. Utilities Utilities ₱ 1,000
Expense = 1,000
Expense
Insurance Premium 36,600
3. Unearned Insurance
Insurance ₱ 3,050 Divide: # of months 12
Income
Income Monthly Insurance 3,050
Principal 24,000
Multiply: Annual Interest Rate
Interest 12%
4. Interest ₱ 2,400
Expense Payable Monthly Interest 28,800
Divide: # of months 12
Monthly Interest 2,400
Prepaid Insurance Premium 24,000

5. Insurance ₱ 2,000
Expense Insurance Divide: # of months 12
113
Monthly Insurance 2,000
Activity 4: PREPARE ADJUSTING AND ADJUSTED TRIAL BALANCE

Adjusting Entries
Date
2020
Dec 31 Salaries Expense ₱ 7,000
Salaries Payable ₱ 7,000
To record accrued salaries expense.
31 Store Supplies Expense 2,300
Store Supplies Payable 2,300
To record expired portion of store supplies.
31 Depreciation Expense-Store Equipment 750
Accumulated Depreciation-Store Equipment 750
To record depreciation for the month of December.
31 Rent Expense 7,500
Prepaid Rent 7,500
To record expired portion of prepaid rent.
31 Utilities Expense 6,000
Utilities Payable 6,000
To record accrued utilities expense.
31 Doubtful Accounts 24,300
Allowance for Doubtful Accounts 24,300
To record bad debts provision.
114
Mema Company
Work Sheet
For the month ended December 31, 2020
Adjustments Adjusted Trial Balance
Account Titles
Dr Cr Dr Cr
Cash ₱ 735,500
Prepaid Rent ₱ 7,500 37,500
Store Supplies 2,300 7,700
Accumulated
Depreciation – Store
Equipment 750 ₱ 750
Mema, Capital 1,105,000
Mema, Drawings 50,000
Sales 835,745
Sales Returns and
Allowances 4,000
Salaries Expense ₱ 7,000 27,000
Utilities Expense 6,000 11,000
Freight Out 4,500
Salaries Payable 7,000 7,000
Utilities Payable 6,000 6,000
Store Supplies Expense 2,300 2,300
115
Depreciation Expense 750 750
Rent Expense 7,500 7,500
Doubtful Accounts 24,300 24,300
Allowance for
Doubtful Accounts 24,300 24,300
₱47,850.00 ₱47,850.00 ₱2,277,570.00 ₱2,277,570.00
116
Section: ________________________________________ Date: _____________________

Accounting is the language of business. Regardless of where in the world a business is located,
financial information is interpreted in the same way. It helps people, both the internal and external
users, to understand what is happening inside the business. Through this accounting information,
a person can assess how a business is doing thus, can make important decisions such as whether
or not a business owner will look for additional investment or for a creditor to grant a business
loan application. Thus, making accurate important reports are crucial to a business.
As you complete the accounting cycle, you will be preparing the different financial reports that are
used by the business to communicate its current situation. Statement of Comprehensive Income or
the Income Statement presents profit or loss generated during the reported period, while the
Statement of Financial Position or Balance Sheet presents the assets, liabilities and equity of the
business as of the reporting period. The Statement of Changes in Owner’s Equity presents the
change in equity and the Statement of Cash Flow presents the cash inflows and outflows during
the reporting period. The Schedule of Cost of Goods Sold is also prepared to reflect the Cost of
Goods Sold for the reporting period.
After preparing the financial reports, you are now ready to close your books. Closing Entries are
made at the end of the accounting period to transfer balances from a nominal/temporary account
to a real/permanent account. After this, the ledger will be updated to reflect the Closing Entries.
Finally, the Post-closing Trial Balance is prepared to reflect the companies permanent account
balances at the end of the reporting period.
2. The learner completes the accounting cycle of a merchandising business
(ABM_FABM11-IVe-j-40)
3. The learner prepares the Statement of Cost of Goods Sold and Gross Profit
(ABM_FABM11- IVe-j-41)
117
Activity 1: ARRANGE ME
Direction: Arrange the jumbled words and use those words to fill out the box to reveal the eight
steps of the Accounting Cycle.
1. GNIZRUOJLINA =
2. LRTAI NCBAAEL =
3. IIAALNNCF TTTMEEANSS =
4. LIONCGS ETH KSOOB =
5. IONSSCATTNAR =
6. JAUIGDNTS LJAOUNR EEISRTN =
7. OEESTWKRH =
8. SOTNPIG =
→ → →
→ → →
Activity 2: IDENTIFY THE FINANCIAL STATEMENT

Direction: Identify which financial statement each account title is used. Write “SFP” if it is
under the Statement of Financial Position, “SCO” for Statement in Changes in Owner’s Equity
or “SCI” for Statement of Comprehensive Income.
1. Sales Returns and Allowances
2. Merchandise Inventory,End
3. Utilities Expense
4. Owner, Capital – beginning
5. Accounts Receivable
118
6. Accounts Payable
7. Cost of Goods Sold
8. Sales Discount
9. Owner, Drawings
10. Freight Out
Activity 3: ACCOUNT TITLE SEARCH
Direction: Find and encircle the five (5) account titles in the grid that will complete the schedule
of cost of goods sold below.
A S D G E S F G N M P L F C B X
D C W X G N C O J E X S Z L B X
S D Q S O J B K F R D V O F G H
D F U Y K F T D L C F E C G H I
J M E I D W R G K H H M O E Q S
P T O R K L O S M A G N S S E D
C F R E I G H T I N M J T D G E
S C N M W X C O J D K F O N A W
M Y K J L R E D L I J D F S D D
J E P F M L G E I S P Z G D F U
W E U M D S J D P E T M O E I R
P U R C H A S E D I S C O U N T
Z E C A S D X C K N B N D O P L
T P H S C N N F D V G H S Q X S
I O A E E S H J K E H Z S A D V
Y U S S W X I H D N K F O B F E
T F E L Q S B G T T D W L T H M
R H S J U Y T R D O K L D R D N
E S F P E P L E J R D W L E O J
W X C D M X S D G Y C B X C K F
Q S B G E D V N M E L B N F D W
U Y T R W F E S D N F G H J K L
E I R E S S E D F D G H I H D V
119
Schedule of Cost of Goods Sold
Merchandise Inventory - beginning

Add: (1)
Less: Purchase Return & Allowances
(2)
Net Purchases
Add: (3)
Total Goods Available for Sale
Less: (4)
(5)
Activity 4: CHECK THE BOX

Direction: Identify what part of the statement of cash flow the following transactions must be
recorded. Put a checkmark (√) on the appropriate box.
Operating Investing Financing
Transactions
Activities Activities Activities
1. Refund to Customers
2. Purchase of Equipment.
3. Payment to suppliers.
4. Owner’s withdrawal of cash from the
business for personal use.
5. Collection from Customers
6. Sale of Equipment.
7. Long term loan from a bank.
8. Receipts from customers.
9. Sale of Merchandise
10. Purchase of Land
Activity 5: CLASSIFY ME
Direction: Classify the following account titles whether they are nominal/temporary accounts or
real/permanent accounts. Write the account title in the column where it is classified.
Income Summary Merchandise Inventory Rent Expense
120
Accounts Payable Sales Purchases Prepaid Rent
Owner, Capital Owner, Drawings Store Supplies
Nominal/Temporary Accounts Real/Permanent Accounts
Activity 6: PREPARE FINANCIAL REPORTS (PERIODIC INVENTORY SYSTEM)

Direction: Using the trial balance of Lim Merchandising for December 31, 2020 under periodic
inventory system, prepare the following:
1. Schedule of Cost of Goods Sold
2. Income Statement
3. Statement of Changes in Owner’s Equity
4. Statement of Financial Position
LIM MERCHANDISING
December 31, 2020
Cash ₱ 45,180
Store Supplies 800
Lim, Capital 80,000
Lim, Drawings 5,000
Sales 67,200
121
Sales Discount 320
Purchases 70,900
Freight In 850
Freight Out 650
Rent Expense 2,500
Total ₱ 174,400 ₱ 174,400
Additional Information: The physical count conducted on December 31, 2020 revealed that
merchandise inventory amounted to ₱ 17,830.
Income Statement
122
Statement of Changes in Owner’s Equity
123
Rubrics for Scoring
Criteria Requirements
124
Schedule of Cost of Goods
Statement of Changes in
Statement of Financial
Statement of Financial
Owner’ s Equity
Performance
Position
Sold
1. CONCEPT
Shows clear understanding of the
principles in preparing the
required financial report. (5) (5) (5) (5)
2. STRUCTURE
Classified all account titles to its
proper financial statement.
Observed proper listing of
account titles and amounts are
transferred correctly. (one point
each account title) (6) (9) (3) (8)
3. COMPUTATION
Use correct computation and
obtained correct total balances.
• Net Purchases (2)
• Total Goods Available for Sale (2)
• Cost of Goods Sold (3) (7)
• Net Sales (2)
• Gross Profit (2)
• Net Income (3) (7)
• Lim, Capital – end (3) (3)
• Total Assets (3)
• Total Liabilities and Owner’s
Equity (3) (6)
Activity 7: PREPARE CLOSING ENTRIES

Directions: Using the information from Activity 5, prepare all the necessary Closing Entries and
the Post-closing Trial Balance of Lim Merchandising for December 31, 2020.
General Journal
Date Account Titles and Explanation Dr Cr
125
126
Activity 8: COMPLETE THE ACCOUNTING CYCLE

Direction: Using the following account title of Maeye Catoc Merchandising Company under
perpetual inventory system, prepare the following:
1. Journalize transactions using the General Journal only
2. Posting Entries
3. Journalize Adjusting Entries
4. Adjusted Trial Balance
5. Income Statement (with supporting notes)
6. Statement of Changes in Owner’s Equity
7. Statement of Financial Position (with supporting notes)
8. Statement of Cash Flow
9. Journalize Closing Entries
10. Post-closing Trial Balance
Chart of Accounts
Assets Income
Current Assets 401 Sales
101 Cash 405 Sales Returns and Allowances
112 Account Receivable 406 Sales Discount
127
113 Allowance for Doubtful Accounts 601 Cost of Goods Sold
115 Merchandise Inventory Operating Expenses
116 Prepaid Rent Distribution Costs
117 Store Supplies 707 Store Supplies Expense
160 Furniture and Fixture 703 Freight-Out
170 Store Equipment 708 Depreciation Expense-Store Equipment
171 Accumulated Depreciation-Store Administrative Expenses
Equipment
Liabilities 701 Salaries Expense
201 Accounts Payable 702 Utilities Expense
202 Notes Payable 704 Rent Expense
203 Salaries Payable 705 Advertising Expense
204 Utilities Payable 709 Doubtful Accounts
Owner’s Equity 801 Income Summary
301 Maeye Catoc, Capital
306 Maeye Catoc, Drawings
For Financial Position use the following:

Cash Cash and Cash Equivalents
Accounts Receivable Trade and Other Receivables
Allowance for Doubtful Accounts
Prepaid Rent Prepaid Expenses
Store Supplies
Store Equipment Property, Plant and Equipment
Account Payable Trade and Other Payables
Salaries Payable
Utilities Payable
128
Business Transactions of Maeye Catoc Merchandising for the month of July 2020.
July 1, 2020 The business, Maeye Catoc Merchandising was registered as a single
proprietorship with the Department of Trade and Industry, Maeye invested ₱
130,000.
July 2, 2020 Bought store supplies on cash basis for ₱ 1,000.
July 2, 2020 Bought merchandise on account from Mina Las Merchandising, ₱ 26,400.
Terms: 2/10, n/30
July 3, 2020 Bought computer equipment on cash basis for ₱ 18,000. Salvage value of
3,000 and useful life of five years.
July 5, 2020 Sold merchandise on account ₱ 20,000, FOB destination, terms: 2/10, n/30.
The cost of goods sold was P16,560.
July 6, 2020 Paid ₱ 750 freight on July 5 sales.
July 6, 2020 Received credits from Mina Las Merchandising for merchandise returned, ₱
500.
July 10, 2020 Collected from July 5 transactions.
July 12, 2020 Paid Mina Las Merchandising.
July 14, 2020 Bought merchandise on cash basis ₱ 15,700.
July 15, 2020 Paid the following:
Advertising ₱ 3,500 Rent ₱ 3,000
Utilities ₱ 900 Salaries ₱ 3,000
July 17, 2020 Borrowed money from China Bank, signed a promissory note for ₱ 20,000.
July 17, 2020 Received refund from the supplier on cash purchased last July 14, ₱ 700.
July 18, 2020 Bought merchandise from Andy Lim Merchandising, ₱ 21,000, FOB
Shipping point, terms: 2/10, n/30
July 19, 2020 Paid freight on July 18 purchases, ₱ 850.
July 21, 2020 Bought merchandise for cash, ₱ 32,600.
July 23, 2020 Sold merchandise for ₱ 27,300. The cost of goods sold was ₱ 21,300.
July 24, 2020 Made refunds from cash customers, ₱ 1,300.
July 28, 2020 Paid Andy Lim Merchandising on the July 18 purchase, ₱ 10,000. No
discount for partial payment.
129
July 29, 2020 Maeye got cash from the business, ₱ 8,000.
July 30, 2020 Sold merchandise on account ₱ 56,400. Terms: 2/10, n/30. The cost of goods
sold was ₱ 40,760.
Additional information:
• Used Store Supplies as of July 31 amounting to ₱ 300.

• Rent paid is for 3 months.
• Salaries incurred in July 16-31 but which remain unpaid as of July 31 amounting to ₱ 3,000.
• Received electric bill for the month of July ₱ 1,000.
• 5% of Accounts Receivable is deemed uncollectible.
GENERAL JOURNAL PAGE 1

DATE ACCOUNT TITLE AND EXPLANATION PR DEBIT CREDIT
July 1
130
5
10
12
131
DATE
ACCOUNT TITLE AND EXPLANATION PR DEBIT CREDIT
14
15
17
17
18
19
132
21
23
23
24

DATE
24
133
28
29
30
30
2. Posting Entries
GENERAL LEDGER
Account Title: CASH Account No: 101
DATE BALANCE
ITEMS PR DEBIT CREDIT
2020 DEBIT CREDIT
134
Account Title: ACCOUNTS RECEIVABLE Account No: 112
DATE BALANCE
2020 DEBIT CREDIT
Account Title: ALLOWANCE FOR DOUBTFUL ACCOUNTS

Account No: 113
DATE BALANCE
2020 DEBIT CREDIT
Account Title: MERCHANDISE INVENTORY Account No: 115
135
DATE BALANCE
2020 DEBIT CREDIT
Account Title: PREPAID RENT Account No: 116

DATE BALANCE
2020 DEBIT CREDIT
Account Title: STORE SUPPLIES Account No: 117

DATE BALANCE
2020 DEBIT CREDIT
136
Account Title: STORE EQUIPMENT Account No: 170
DATE BALANCE
2020 DEBIT CREDIT
Account Title: ACCUMULATED DEPRECIATION-STORE EQUIPMENT

Account No: 171
DATE BALANCE
2020 DEBIT CREDIT
Account Title: ACCOUNTS PAYABLE Account No: 201

DATE BALANCE
2020 DEBIT CREDIT
137
Account Title: NOTES PAYABLE Account No: 202
DATE BALANCE
2020 DEBIT CREDIT
Account Title: SALARIES PAYABLE Account No: 203

DATE BALANCE
2020 DEBIT CREDIT
Account Title: UTILITIES PAYABLE Account No: 204

DATE BALANCE
2020 DEBIT CREDIT
Account Title: MAEYE CATOC, CAPITAL Account No: 301

DATE BALANCE
2020 DEBIT CREDIT
Account Title: MAEYE CATOC, DRAWINGS Account No: 306

DATE ITEMS PR DEBIT CREDIT BALANCE
138
2020 DEBIT CREDIT
Account Title: SALES Account No: 401

DATE BALANCE
2020 DEBIT CREDIT
Account Title: SALES RETURN AND ALLOWANCES Account No: 405

DATE BALANCE
2020 DEBIT CREDIT
Account Title: SALES DISCOUNT Account No: 406

DATE BALANCE
2020 DEBIT CREDIT
Account Title: COST OF GOODS SOLD Account No: 601
139
DATE BALANCE
2020 DEBIT CREDIT
Account Title: SALARIES EXPENSE Account No: 701

DATE BALANCE
2020 DEBIT CREDIT
Account Title: UTILITIES EXPENSE Account No: 702

2020 DEBIT CREDIT
Account Title: FREIGHT OUT Account No: 703
140
DATE BALANCE
2020 DEBIT CREDIT
Account Title: RENT EXPENSE Account No: 704

DATE BALANCE
2020 DEBIT CREDIT
Account Title: ADVERTISING EXPENSE Account No: 705

DATE BALANCE
2020 DEBIT CREDIT
Account Title: STORE SUPPLIES EXPENSE Account No: 707

DATE BALANCE
2020 DEBIT CREDIT
141
Account Title: DEPRECIATION EXPENSE-STORE EQUIPMENT Account No: 708
DATE BALANCE
2020 DEBIT CREDIT
Account Title: DOUBTFUL ACCOUNTS Account No: 709

DATE BALANCE
2020 DEBIT CREDIT
Account Title: INCOME SUMMARY Account No: 801

DATE BALANCE
2020 DEBIT CREDIT
142
DATE
2020
July 31
31
31
31
31
31
143

144
Income Statement
Notes
Note 1: Net Sales
Note 2: Distribution Costs
Note 3: Administrative Expenses
145
6. Statement of Changes in Equity
ASSETS
146
Notes
LIABILITIES AND EQUITY
Note 4: Trade and Other Receivables
147
Note 5: Prepaid Expenses
Note 6: Property, Plant and Equipment
Note 7: Trade and Other Payables
Statement of Cash Flow
148

DATE
2020
Jul 31
31
149
31
31
31
150
Post-closing Trial Balance
Account
Number
151
Reflection
In your own words, what are the things you need to remember in completing the accounting cycle?
References
Answer Key
Activity 1: ARRANGE ME (16 points)
ARRANGED WORDS STEPS IN TE ACCOUNTING
CYCLE
1. JOURNALIZING
2. TRIAL BALANCE 1. Transactions
3. FINANCIAL STATEMENTS 2. Journalizing
4. CLOSING THE BOOKS 3. Posting
5. TRANSACTIONS 4. Trial Balance
6. ADJUSTING JOURNAL ENTRIES 5. Worksheet
7. WORKSHEET 6. Adjusting Journal Entries
8. POSTING 7. Financial Statements
8. Closing the Books
Activity 2: IDENTIFY THE FINANCIAL STATEMENT (10 points)
1. SCI 6. SFP
2. SFP 7. SCI
152
3. SCI 8. SCI
4. SCE 9. SCE
5. SFP 10. SCI
Activity 3: ACCOUNT TITLE SEARCH (10 points)
A S D G E S F G N M P L F C B X
D C W X G N C O J E X S Z L B X
S D Q S O J B K F R D V O F G H
D F U Y K F T D L C F E C G H I
J M E I D W R G K H H M O E Q S
P T O R K L O S M A G N S S E D
C F R E I G H T I N M J T D G E
S C N M W X C O J D K F O N A W
M Y K J L R E D L I J D F S D D
J E P F M L G E I S P Z G D F U
W E U M D S J D P E T M O E I R
P U R C H A S E D I S C O U N T
Z E C A S D X C K N B N D O P L
T P H S C N N F D V G H S Q X S
I O A E E S H J K E H Z S A D V
Y U S S W X I H D N K F O B F E
T F E L Q S B G T T D W L T H M
R H S J U Y T R D O K L D R D N
E S F P E P L E J R D W L E O J
W X C D M X S D G Y C B X C K F
Q S B G Schedule
E D V N M
of Cost E LSoldB
of Goods N F D W
U Y T R W F E S D N F G H J K L
E I R Merchandise
E S S Inventory
E D -Fbeginning
D G H I H D V
Add: (1) Purchases
Less: Purchase Return & Allowances
(2) Purchase Discount
Net Purchases
Add: (3) Freight In
Total Goods Available for Sale
Less: (4) Merchandise Inventory, end
(5) Cost of Goods Sold
153
Activity 4: CHECK THE BOX (10 points)
Operating Investing Financing
Transactions
Activities Activities Activities
1. Refund to Customers √
2. Purchase of Equipment. √
3. Payment to suppliers. √
4. Owner’s withdrawal of cash from the √
business for personal use.
5. Collection from Customers √
6. Sale of Equipment. √
7. Long term loan from a bank. √
8. Receipts from customers. √
9. Sale of Merchandise √
10. Purchase of Land √
Activity 5: CLASSIFY ME (10 points)

Nominal/Temporary Accounts Real/Permanent Accounts
Income Summary Merchandise Inventory
Sales Prepaid Rent
Rent Expense Owner, Capital
Owner, Drawings Accounts Payable
Purchases Store Supplies
154
Activity 6: PREPARE FINANCIAL REPORTS (PERIODIC INVENTORY SYSTEM)
LIM MERCHANDISING
December 31, 2020
Merchandise Inventory, beginning ₱ 0
Purchases 70,900
Less: Purchase Returns and Allowances ₱ 880
Purchase Discount 320 1,200
Net Purchases 69,700
Add: Freight In 850
Total Goods Available for Sale 70,550
Less: Merchandise Inventory, end 17,830
Cost of Goods Sold ₱ 52,720
LIM MERCHANDISING
Income Statement
December 31, 2020
Sales ₱ 67,200
Less: Sales Returns and Allowances ₱ 800
Sales Discount 320 1,120
Net Sales 66,080
Less: Cost of Goods Sold 52,720
Gross Profit 13,360
Less: Operating Expenses
155
Freight Out 650
Rent Expense 2,500
Advertising Expense 2,000 10,850
Net Income ₱ 2, 510
LIM MERCHANDISING
Statement of Changes in Owner’s Equity
December 31, 2020
Lim, Capital – beginning ₱ 80,000
Less: Lim, Drawings 5,000
Total 75,000
Add: Net Income 2,510
Lim, Capital – end ₱ 77,510
LIM MERCHANDISING
As of December 31, 2020
Assets
Current Assets
Cash ₱ 45,180
Store Supplies 800
Merchandise Inventory 17,830 ₱ 88,510
Non-Current Assets
Total Assets ₱ 103, 510
Liabilities and Owner’s Equity

Current Liabilities
156
Non-Current Liabilities
Owner’s Equity
Lim, Capital – end 77,510
Total Liabilities and Owner’s Equity ₱ 103,510
Activity 7: PREPARE CLOSING ENTRIES (40 points)

Closing Entries
General Journal
Date
Account Titles and Explanation Dr Cr
2020
Dec. 31 Merchandise Inventory ₱ 17,830
Income Summary ₱ 17,830
To record ending inventory
31 Sales 67,200
Sales Discount 320
Income Summary 66,080
To close sales accounts
31 Income Summary 70,550
Purchases 70,900
Freight In 850
To close purchase accounts
157
Freight Out 650
Rent Expense 2,500
To close operating expenses
Lim, Capital 2,510
To close Income Summary
31 Lim, Capital 5,000 5,000
Lim, Drawings
To close drawings account
LIM MERCHANDISING
December 31, 2020
Cash ₱ 45,180
Store Supplies 800
Equipment 15,000
Lim, Capital 77,510
Total ₱ 103,510 ₱ 103,510
158
Activity 8: COMPLETE THE ACCOUNTING CYCLE (200 points)

DATE
2020
July 1 Cash 101 ₱ 130,000
Maeye Catoc, Capital 301 ₱ 130,000
To record initial cash investment by owner
2 Store Supplies 117 1,000

Cash 101 1,000
To record purchase of store supplies

To record purchase of merchandise on account from Mina Las Merchandising.
Term: 2/10, n/30
3 Store Equipment 170 18,000

Cash 101 18,000
To record purchase of equipment
5 Account Receivable 112 20,000

Sales 401 20,000
To record sale of merchandise on account.Term: 2/10, n/30
5 Cost of Goods Sold 601 16,560
159
To update merchandise inventory
6 Freight Out 703 750

Cash 101 750
To record payment of freight on sold merchandise
6 Accounts Payable 201 500

To record returned merchandise to Mina Las Merchandising
10 Cash 101 19,600

To record collection from customers

Cash 101 25,382
To record full payment to Mina Las Merchandising
DATE
2020
Cash 101 15,700
To record purchase of merchandise
160
Cash 101 10,400
To record payment of operating expenses
17 Cash 101 20,000

To record money borrowed from China Bank
17 Cash 101 700

To record refund from supplier

To record purchase of merchandise on account from Andy Lim Merchandise.
Term: 2/10, n/30
19 Merchandise Inventory 115 850

Cash 101 850
To record payment of freight in

Cash 101 32,600
To record purchase of merchandise
161
23 Cash 101 27,300
Sales 401 27,300
To record sale of merchandise

24 Sales Returns and Allowances 405 1,300

Cash 101 1,300
To record refund to customers

DATE
2020
Cost of Goods Sold 601 1,300
To record returned merchandise

Cash 101 10,000
To record partial payment to Andy Lim Merchandising
29 Maeye Catoc, Drawings 306 8,000

Cash 101 8,000
To record Maeye Catoc’s withdrawal of cash
162
Sales 401 56,400
To record sale of merchandise on account. Term: 2/10, n/30

2. Posting Entries
GENERAL LEDGER
Account Title: CASH Account No: 101
DATE BALANCE
2020 DEBIT CREDIT
July 1 Initial investment GJ1 130,000 130,000
2 Purchase-supplies GJ1 1,000 129,000
3 Purchase-equipment GJ1 18,000 111,000
6 Payment-freight GJ1 750 110,250
10 Collection from customers GJ1 19,600 129,850
12 Payment to Mina Las GJ1 25,382 104,468
14 Purchase of merchandise GJ2 15,700 88,768
15 Payment-expenses GJ2 10,400 78,368
17 Loan-China Bank GJ2 20,000 98,368
17 Refund from supplier GJ2 700 99,068
19 Payment of freight GJ2 850 98,218
21 Purchase of merchandise GJ2 32,600 65,618
23 Sale of merchandise GJ2 27,300 92,918
163
24 Refund to customers GJ2 1,300 91,618
28 Partial payment-Andy Lim GJ3 10,000 81,618
29 Cash withdrawal GJ3 8,000 73,618
31 Balance 73,618
Account Title: ACCOUNTS RECEIVABLE Account No: 112

DATE BALANCE
2020 DEBIT CREDIT
July 5 Sale-merchandise GJ1 20,000 20,000
10 Payment of Customer GJ1 20,000 -0-
30 Sale-merchandise GJ3 56,400 56,400
31 Balance 56,400
Account Title: ALLOWANCE FOR DOUBTFUL ACCOUNTS

Account No: 113
DATE BALANCE
2020 DEBIT CREDIT
July 31 Adjusting Entry GJ4 2,820 2,820
31 Balance 2,820
Account Title: MERCHANDISE INVENTORY Account No: 115

DATE BALANCE
2020 DEBIT CREDIT
July 2 Purchase on account GJ1 26,400 26,400
5 Sale GJ1 16,560 9,840
6 Purchase returned GJ1 500 9,340
12 Purchase discount GJ1 518 8,822
14 purchase GJ2 15,700 24,522
164
17 Refund from suppliers GJ2 700 23,822
18 Purchase on account GJ2 21,000 44,822
19 Payment of Freight in GJ2 850 45,672
21 purchase GJ2 32,600 78,272
23 Sale GJ2 21,300 56,972
24 Returned merchandise GJ3 1,300 58,272
30 Sale-on account GJ3 40,760 17,512
31 Balance 17,512
Account Title: PREPAID RENT Account No: 116

DATE BALANCE
2020 DEBIT CREDIT
July 31 Adjusting entry GJ4 2,000 2,000
31 Balance 2,000
Account Title: STORE SUPPLIES Account No: 117

DATE BALANCE
2020 DEBIT CREDIT
July 2 purchase GJ1 1,000 1,000
31 Adjusting entry GJ3 300 700
31 Balance 700
Account Title: STORE EQUIPMENT Account No: 170

DATE BALANCE
2020 DEBIT CREDIT
165
July 3 purchase GJ1 18,000 18,000
31 Balance 18,000
Account Title: ACCUMULATED DEPRECIATION-STORE EQUIPMENT

Account No: 171
DATE BALANCE
2020 DEBIT CREDIT
July 31 Adjusting Entry 250 250
Balance 250
Account Title: ACCOUNTS PAYABLE Account No: 201

DATE BALANCE
2020 DEBIT CREDIT
July 2 Purchase merchandise – GJ1 26,400 26,400
Mina Las Merchandising
6 Purchase returned – Mina GJ1 500 25,900
Las Merchandising
12 Payment to Mina Las GJ1 25,900 -0-
Merchandising
18 Purchase merchandise – GJ2 21,000 21,000
Andy Lim Merchandising
28 Partial payment – Andy Lim GJ3 10,000 11,000
Merchandising
31 Balance 11,000
Account Title: NOTES PAYABLE Account No: 202

DATE BALANCE
2020 DEBIT CREDIT
July 17 Loan - China Bank GJ2 20,000 20,000
166
31 Balance 20,000
Account Title: SALARIES PAYABLE Account No: 203

DATE BALANCE
2020 DEBIT CREDIT
31 Balance 3,000
Account Title: UTILITIES PAYABLE Account No: 204

DATE BALANCE
2020 DEBIT CREDIT
31 Balance 1,000
Account Title: MAEYE CATOC, CAPITAL Account No: 301

DATE BALANCE
2020 DEBIT CREDIT
July 1 Initial investment GJ1 130,000 130,000
31 Closing entry GJ5 8,160 138,160
31 Balance 130,160
Account Title: MAEYE CATOC, DRAWINGS Account No: 306

167
2020 DEBIT CREDIT
July 29 Cash withdrawal GJ3 8,000 8,000
31 Closing entry GJ5 8,000 -0-
31 Balance -0-
Account Title: SALES Account No: 401

DATE BALANCE
2020 DEBIT CREDIT
July 5 Merchandise GJ1 20,000 20,000
23 merchandise GJ2 27,300 47,300
30 Merchandise-on account GJ3 56,400 103,700
31 Closing Entry GJ5 103,700 -0-
Account Title: SALES RETURN AND ALLOWANCES Account No: 405

DATE BALANCE
2020 DEBIT CREDIT
July 24 Refund to customers GJ2 1,300 1,300
Account Title: SALES DISCOUNT Account No: 406

DATE BALANCE
2020 DEBIT CREDIT
July 10 Discount to customer GJ1 400 400
31 Closing Entry GJ5 400 -0-
Account Title: COST OF GOODS SOLD Account No: 601
168
DATE BALANCE
2020 DEBIT CREDIT
July 5 Sale of merchandise GJ1 16,560 16,560
24 Returned merchandise GJ3 1,300 36,560
Account Title: SALARIES EXPENSE Account No: 701

DATE BALANCE
2020 DEBIT CREDIT
July 15 payment GJ2 3,000 3,000
31 Adjusting entry GJ4 3,000 6,000
31 Balance -0-
Account Title: UTILITIES EXPENSE Account No: 702

2020 DEBIT CREDIT
July 15 payment GJ2 900 900
31 Balance
169
Account Title: FREIGHT OUT Account No: 703
DATE BALANCE
2020 DEBIT CREDIT
July 6 payment GJ1 750 750
31 Closing entry GJ5 750 -0-
31 Balance -0-
Account Title: RENT EXPENSE Account No: 704

DATE BALANCE
2020 DEBIT CREDIT
31 Balance -0-
Account Title: ADVERTISING EXPENSE Account No: 705

DATE BALANCE
2020 DEBIT CREDIT
31 Balance -0-
Account Title: STORE SUPPLIES EXPENSE Account No: 707

DATE BALANCE
2020 DEBIT CREDIT
July 31 Adjusting entry GJ4 300 300
170
Balance -0-
Account Title: DEPRECIATION EXPENSE-STORE EQUIPMENT Account No: 708

DATE BALANCE
2020 DEBIT CREDIT
July 31 Adjusting entry GJ4 250 250
Balance -0-
Account Title: DOUBTFUL ACCOUNTS Account No: 709

DATE BALANCE
2020 DEBIT CREDIT
July 31 Adjusting entry GJ4 2,820 2,820
Balance -0-
Account Title: INCOME SUMMARY Account No: 801

DATE BALANCE
2020 DEBIT CREDIT
July 31 Closing entry GJ4 102,000 102,000
31 Balance -0-
171

DATE
2020
July 31 Depreciation Expense-Store Equipment 708 ₱ 250
Accumulated Depreciation-Store 171 ₱ 250
Equipment
Adjusting entry - depreciation
31 Store Supplies Expense 707 300

Store Supplies 117 300
Adjusting entry – prepaid expense
31 Prepaid Rent 116 2,000

Adjusting entry – prepaid expense

Salaries Payable 203 3,000
Adjusting entry – accrued expense
31 Utilities Expense 702 1,000

Utilities Payable 204 1,000
Adjusting entry – accrued expense
31 Doubtful Accounts 709 2,820
Allowance for Doubtful Accounts 113 2,820
To record unpaid electric bill
172
Mae Catoc Merchanding

July 31,2020
Cash 73,618
Store Supplies 700
Maeye Catoc, Capital 130,000
Maeye Catoc, Drawings 8,000
Sales 103,700
Sales Discount 400
Freight Out 750
Rent Expense 1,000
Accumulated Depreciation-Store Equipment 250
Depreciation Expense - Store Equipment 250
Store Supplies Expense 300
Prepaid Rent 2,000
Salaries Payable 3,000
Doubtful Accounts 2,820
Allowance for Doudtful Accounts 2,820
Total 271,770 271,770
MAEYE CATOC MERCHANDISING

Income Statement
For the month ended July 31, 2020
173
Notes
Net Sales 1 ₱ 102,000
Gross Profit ₱ 24,680
Operating Expenses
Distribution Costs 2 ₱ 1,300
Administrative Expenses 3 15,220 16,520
Note 1: Net Sales

Sales ₱ 103,700
Less: Sales Returns and Allowances ₱ 1,300
Sales Discount 400 1,700
Net Sales ₱ 102,000
Note 2: Distribution Costs

Store Supplies Expense ₱ 300
Freight Out 750
Depreciation Expense-Store Equipment 250
Total Distribution Costs ₱ 1,300
Note 3: Administrative Expenses

Salaries Expense ₱ 6,000
Rent Expense 1,000
Doubtful Accounts 2,820
Total Administrative Costs ₱ 15,220
174
6. Statement of Changes in Equity

Maeye Catoc, Capital - beginning ₱ 130,000
Less: Maeye Catoc, Drawings 8,000
Total ₱ 122,000
Add: Net Income 8,160
Maeye Catoc, Capital - end ₱ 130,160

ASSETS
Notes
Current Assets
Cash and Cash Equivalents ₱ 73,618
Trade and Other Receivables 4 53,580
Prepaid Expenses 5 2,700
Total Current Assets ₱ 147,410
Non-Current Assets
Property, Plant and Equipment 6 17,750
Total Assets ₱ 165,160
LIABILITIES AND EQUITY
Current Liabilities
175
Trade and Other Payables 7 ₱ 15,000
Non-Current Liabilities
Total Liabilities ₱ 35,000
Owner’s Equity
Lim, Capital - end ₱ 130,160
Total Liabilities and Owner’s Equity ₱ 165,160
Note 4: Trade and Other Receivables

Less: Allowance for Doubtful Accounts 2,820
Total Trade and Other Receivables ₱ 53,580
Note 5: Prepaid Expenses

Prepaid Rent ₱ 2,000
Store Supplies 700
Total Prepaid Expenses ₱ 2,700
Note 6: Property, Plant and Equipment

Store Equipment ₱ 18,000
Less: Accumulated Depreciation-Store Equipment 250
Carrying Value ₱ 17,750
Note 7: Trade and Other Payables

Salaries Payable 3,000
176
Total Trade and Other Payables ₱ 15,000

Statement of Cash Flow
Cash Flow from Operating Activities
Receipts:
Collection from Customers ₱ 19,600
Borrowings from Bank 20,000
Refund from Suppliers 700
Sale of Merchandise 27,300 ₱ 67,600
Payments:
Purchase of Store Supplies (1,000)
Payment of Freight Out (750)
Payment to Supplier (35,382)
Purchase of Merchandise (48,300)
Payment of Operating Expense (10,400)
Payment of Freight In (850)
Refund to Customers (1,300) (97,982)
Total Cash Flow from Operating Activities (30,382)
Cash Flow from Investing Activity
Acquisition of Property, Plant, and Equipment (18,000)
Maeye Catoc, Capital 130,000
Less: Maeye Catoc, Drawings (8,000) 122,000
Total Cash on Hand ₱ 73,618
177

DATE
2020
Jul 31 Sales 401 ₱ 103,700
Sales Returns and Allowances 405 ₱ 1,300
Income Summary 801 102,000
To close sales account
31 Income Summary 801

Cost of Goods Sold 601 77,320
To close Cost of Goods Sold
31 Income Summary 801 16,520

Freight Out 703 750
Advertising Expense 705 3,500
Store Supplies Expense 707 300
Depreciation Expense-Store Equipment 708 250
Doubtful Accounts 709 2,820
To close Operating Expenses
31 Income Summary 801 8,160

Maeye Catoc, Capital 301 8,160
178
To close Income Summary
31 Maeye Catoc, Capital 301 8,000

Maeye Catoc, Drawings 306 8,000
To close Drawings Account

Post-closing Trial Balance
July 31, 2020
Account
Number
Cash 101 ₱ 73,618
Allowance for Doubtful Accounts 113 ₱ 2,820
Prepaid Rent 116 2,000
Store Supplies 117 700
Store Equipment 170 18,000
Accumulated Depreciation-Store
171 250
Equipment
Salaries Payable 203 3,000
Utilities Payable 204 1,000
Maeye Catoc, Capital 301 130,160
Total ₱ 168,230 ₱ 168,230
179
180
181

Fundamentals of Accountancy, Business and Management 1: Second Quarter

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Fundamentals of Accountancy, Business and Management 1: Second Quarter

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11

LEARNING ACTIVITY SHEETS

Learning Activity Sheet in Fundamentals of Accountancy,

Focal Persons : Inocencio T. Balag, EPS Math, SDO Isabela

Printed by DepEd Regional Office No. 02

Competency Page No.

Prepares the Adjusting Entries 1

Complete the Accounting Cycle 10

Describes the nature of transactions in a merchandising business 37

Posts transactions in the general and subsidiary ledgers 66

The learner completes the accounting cycle of a merchandising business

LEARNING ACTIVITY SHEET

Background Information for Learners

Learning Competency: Prepares the Adjusting Entries (ABM_FABM11-1Va-d-33)

Directions: Solve the given problems

Concept Does not Does not Understands Shows clear

Learning Activity Sheet 2

December 31 Supplies Expense P9,000

December Accrued Service Revenue P63,000

Doubtful Account Expense = 520,000 × 3%

a. Depreciation of Office Equipment, P2,000

Depreciation is recorded by debiting Depreciation Expense and crediting Accumulated

c. The unused supplies balance is P5,300

d. Unearned Service Revenue, P3,000

e. Insurance Premium expired during the month, P500

Praca General Services

LEARNING ACTIVITY SHEET

Background Information for Learners

Learning Competency with code:

Praca General Services

Use the following Charts of Accounts:

Kans Taxes and Accounting Services

601 Income and Expense Summary

Prepare the following:

Rubrics for Scoring Income Statement

Concept Does not Does not Understands Shows clear

Concept Does not Does not Understands Shows clear

ANSWER SHEETS FOR ACCOUNTING CYCLE

Account Name: ACCOUNTS RECEIVABLE

Account Name: SUPPLIES

Account Name: Prepaid Insurance

Account Name: ACCUMULATED DEPRECIATION-OFFICE EQUIPMENT

Account Name: ACCOUNTS PAYABLE

Account Name: Loans Payable

Account Name: KAN, CAPITAL

Account Name: KAN, DRAWINGS

Account Name: INCOME AND EXPENSE SUMMARY

Account Name: SALARIES EXPENSE

Account Name: SUPPLIES EXPENSE

Account Name: UTILITIES EXPENSE

Account Name: INSURANCE EXPENSE

Unadjusted Trial Balance

Account Title Debit Credit

Statement of Changes in Equity

LIABILITIES AND OWNER'S EQUITY

Cash Flow from Operating Activities:

Cash Flow from Investing Activities

Cash Flow from Financing Activities

Total Cash from Financing Activities

Kan Taxes and Accounting Firm

Praca General Services

Less: operating Expenses

7 Office Equipment 151 33,000