ACCOUNTING +1

LESSON 4

Recording Business
Transactions
Transaction Analysis
Source Documents
Examples of Source Documents
TYPES OF JOURNAL ENTRY
1. Simple Entry – only two accounts are affected;
one debit and one credit
Debit Credit
Equipment 5,000
Cash 5,000

2. Compound Entry – more than two accounts are

recorded in a journal entry
Equipment 5,000
Cash 2,000
Accounts Payable 3,000
 TRANSACTIONS ARE JOURNALIZED
 The process of recording transaction is called
journalizing.
 Rules of Double-Entry System:
1. Two or more accounts are affected by each
transaction.
2. The sum of debits for every transaction equals the
sum of the credits.
3. The equality of the accounting equation is always
maintained.
ILLUSTRATION:

Initial Investment (Source of Assets)

 On May 1, Dr. Rose Besario, a social entrepreneur,

decided to organize her own wedding consultancy,
under the name Weddings “R” Us. She invested
₱250,000 into the entity.

Journal Entry:
Debit Credit
May 1 - Cash 250,000
Besario, Capital 250,000
Rent Paid in Advance (Exchange in Assets)

May 1 – Rented office space and paid two months

rent in advance, ₱8,000

Journal Entry:
Debit Credit
May 1 - Prepaid Rent 8,000
Cash 8,000
Note Issued for Cash (Source of Assets)

May 2 – Rose Besario, issued a promissory note for a

₱210,000 loan from Metrobank. This loan will be
used to acquire a service vehicle. The note carries
a 20% interest per annum. Both interest and
principal are payable in full in one year.

Journal Entry:
Debit Credit
May 2 - Cash 210,000
Notes Payable 210,000
May 2 – Hired an office assistant and an account
executive with monthly salary of ₱7,800 each, or
each is to received ₱300 per day for the 26 day
work month.

= No Journal Entry
Service Vehicles Acquired for Cash
(Exchange of Assets)

May 4 – Acquired Service Vehicle for P420,000.

Journal Entry:
Debit Credit
May 4 - Service Vehicle 420,000
Cash 420,000
Insurance Premium paid (Exchange of
Assets)

May 4 – Paid AXA Insurance, ₱14,400 for one year

comprehensive insurance coverage on the vehicle.

Journal Entry:
Debit Credit
May 4 - Prepaid Insurance 14,400
Cash 14,400
Office Equipment Acquired Part on Account
and Part by Cash (Exchange and Source of
Assets)

May 5 – Acquired office equipment from Office Mart for

₱60,000, paying ₱15,000 cash and the balance to be
paid next month.

Journal Entry:
Debit Credit
May 5 - Office Equipment 60,000
Cash 15,000
Accounts Payable 45,000
Supplies Purchased on Account (Source of
Assets)

May 8 – Purchases supplies on credit for ₱18,000 from

Liana’s Merchandise.

Journal Entry:
Debit Credit
May 8 - Supplies 18,000
Accounts Payable 18,000
Accounts Payable Partially Settled (Use of
Assets)

May 9 – Paid Liana’s Merchandise ₱10,000 of the amount

owed.

Journal Entry:
Debit Credit
May 9 - Accounts Payable 10,000
Cash 10,000
Revenues Earned and Cash Collected
(Source of Assets)

May 10 – Coordinated and organized simple bridal

arrangement for 3 couples and collected fees of ₱8,800
per couple.

Journal Entry:
Debit Credit
May 10 - Cash 26,400
Consulting Revenues 26,400
Salaries Paid (Use of Assets)

May 13 – Paid Salaries ₱6,400

Journal Entry:
Debit Credit
May 13 - Salaries Expense 6,400
Cash 6,400
Unearned Revenues Collected (Source of
Assets)

May 15– The entity is earning additional revenues by

referring consulting clients to friendly hotels, caterers,
printers and couturiers.
Received ₱10,000 advance fees from a hotel for
referring 3 clients.

Journal Entry:
Debit Credit
May 10 - Cash 10,000
Unearned Referral Revenue 10,000
Revenues Earned on Account (Source of
Assets)

May 19 – Coordinated and finalized elaborated bridal

arrangements for 3 couples and billed fees of ₱12,000
per couple.

Journal Entry:
Debit Credit
May 19 - Accounts Receivable 36,000
Consulting Revenues 36,000
Withdrawal of Cash by the Owner (Use of
Assets)

May 25 – Besario withdrew ₱14,000 for personal

expenses

Journal Entry:
Debit Credit
May 25 - Besario, Withdrawals 14,000
Cash 14,000
Salaries Paid (Use of Assets)

May 27 – Paid Salaries , ₱7,200

Journal Entry:
Debit Credit
May 27 - Salaries Expense 7,200
Cash 7,200
Expenses Incurred but Unpaid (Exchange of
Claims)

May 30 – Received Globe Telecom Bill amounting to

₱1,400

Journal Entry:
Debit Credit
May 30 - Utilities Expense 1,400
Utilities Payable 1,400
Accounts Receivable Partially Collected
(Exchange of Assets)

May 30 – Received ₱24,000 from two couples for services

billed last May 19.

Journal Entry:
Debit Credit
May 30 - Cash 24,000
Accounts Receivable 24,000
Expenses Incurred and Paid (Use of Assets)

May 31 – Received and paid electricity bill for the month

amounting to ₱3,000

Journal Entry:
Debit Credit
May 31 - Utilities Expense 3,000
Cash 3,000
Problem 1. (for Class Discussion)
Problem 2. (for Class Discussion)