UNIVERSITY OF SAINT LOUIS

Tuguegarao City
SCHOOL OF ACCOUNTANCY, BUSINESS and HOSPITALITY

First Semester
Academic Year 2021-2022
ONLINE LEARNING MODULE
ACCT 1026- Financial Accounting and Reporting

Lesson 1: The Accounting Equation

REMINDERS:
Get Involved. USL expects you to do the following:
• Lessons will be uploaded every Monday, and submission will be every Friday of the week.
• Comply with all requirements (written outputs, projects/performance tasks examinations and the like.)  Turn in learning tasks on time
to avoid backlogs.
• For any query that you want to make about your lessons or procedures in school, contact us through our messenger group chat, LMS chat
boxes or feel free to contact us through the following during our consultation hours

Remember:
Expect to do a lot of reading, problem-solving activities and other self-directed activities. Varied assessments or activities will be given.
At the outset, I am strictly warning you against copying your classmates’ output without exerting any effort. We will be asking you to
make a Journal of Learning (similar to your notebook during face to face classes) to record and assess the extent of learning during the
term.
This Week’s Time Table: (August 17 – 21, 2021)

For this week, the following shall be your guide for the different lessons and tasks that you need to accomplish. Be patient, read them carefully before proceeding to the tasks
expected of you.
HAVE A FRUITFUL LEARNING EXPERIENCE 😊
Date Topics Activities or Tasks
August 17 I. The accounting equation Read Lessons from books and handouts
August 18 a. The basic accounting equation Online discussion
August 19 b. The expanded accounting equation Accomplish the drills and exercises
August 20 c. Applications of the accounting equation Submission of Assessments
Participate in the scheduled Quiz
Learning Outcomes:
1. Elaborate the accounting equation
2. Perform operations involving simple cases with the use of accounting equation

LEARNING CONTENT
Good Morning and Welcome to our class.
Our course for this semester is Financial Accounting and Reporting, the foundation of all accounting related courses.
Before we start. Let us first concentrate on basic accounting equation.

What is the Accounting Equation?

An accounting transaction is a business activity or event that causes a measurable change in the accounting
equation.

The accounting equation is a basic principle of accounting and a fundamental element of the balance sheet.
The equation is as follows:

Assets = Liabilities + Equity

This equation sets the foundation of double-entry accounting and highlights

the structure of the balance sheet. Double-entry accounting is a system
where every transaction affects both sides of the accounting equation.

For every change to an asset account, there must be an equal change to a

related liability or equity account. It is important to keep the accounting equation in mind when performing
journal entries.

NOTE: If an entity keeps accurate records, the accounting equation will always be "in balance," meaning the
left side should always equal the right side. The balance is maintained because every business transaction
affects at least two of an entity's accounts. For example, when an entity borrows money from a bank, the
entity's assets will increase and its liabilities will increase by the same amount. When an entity purchases
inventory for cash, one asset will increase and one asset will decrease. Because there are two or more
accounts affected by every transaction, the accounting system is referred to as double-entry accounting.

The balance sheet is broken down into three major sections and their various underlying items: Assets,
Liabilities and Equity.

ASSETS- are future economic benefits controlled by an organization/entity as a result of past transactions or
other past events.

-reflect the total value of the property that the business has, and which is in its turnover. In other words, it is
what it owns.

LIABILITIES- Liabilities are future sacrifices of economic benefits that an organization is presently obliged
to make to other organizations or individuals as a result of past transactions or events.

-reflect the size of the financing of an organization’s assets by third parties, banks, and private financial
institutions. This is what the company owes.

EQUITY- represents the residual (what is left) once all fixed claims have
been satisfied or simply “assets less/minus liabilities”.

-equity characterizes the value of investments made in this organization by

its owner/s

Example 1:

Juan dela Cruz started his Coffee Shop business by investing his Cash savings amounting to P 500,000.00
and borrowed P250,000.00 from ABC Bank. Assets= Cash P 500,000.00 (owned)

Liabilities= Loan P 250,000.00 (owed) Assets = Liabilities + Equity

P 500,000.00 = P 250,000.00 + P 250,000.00
Equity= Assets – Liabilities (P 250,000.00)
Assets - Liabilities= Equity
P 500,000.00 – P 250,000.00 = P 250,000.00

Assets – Equity = Liabilities

P 500,000.00 – P 250,000.00 = P 250,000.00
THE EXPANDED ACCOUNTING EQUATION

The expanded accounting equation provides more details for the owner's equity amount shown in the basic
accounting equation. The expanded accounting equation for a sole proprietorship is: Assets = Liabilities +
Equity (Owner's Capital) + Revenues – Expenses – Owner's Draws.

The expanded accounting equation allows you to see separately (1) the impact on equity from net income
(increased by revenues, decreased by expenses), and (2) the effect of transactions with owners (draws,
dividends, sale or purchase of ownership interest).

EQUITY- is the residual interest in the assets of the entity after deducting all the liabilities (IASB Framework).
 - is what the owners of an entity have invested in an enterprise. It represents what the business
owes to its owners. It is also a reflection of the capital left in the business after assets of the
entity are used to pay off any outstanding liabilities.

REVENUE- is the income generated from normal business operations and includes discounts and deductions
for returned merchandise. It is the top line or gross income figure from which costs are subtracted to determine
net income.

- If the revenues earned are a main activity of the business, they are considered to be operating
revenues. If the revenues come from a secondary activity, they are considered to be
nonoperating revenues.
- Normally increases ASSETS.

EXPENSE- An expense is the cost of operations that a company incurs to generate revenue. As the popular
saying goes, “it costs money to make money.”

- There are two main categories of business expenses in accounting: operating expenses and
nonoperating expenses.
- Normally decreases ASSETS.

***The difference between revenue

and expenses represents profit or
loss.

- If revenue is greater
than expenses, the
difference is profit
- If revenue is less than
expenses, the
difference is loss

Example 2:

Juan dela Cruz, on the first month of operating his Coffee Shop, earned a Revenue (received cash) of P
50,000.00 and incurred total expenses (paid cash) of in the amount of P 30,000.00 (Wages of
crew/staff/cashier, Supplies, Rent, Utility Expenses).

Assets= P 500,000.00
Liabilities= P 250,000.00
Equity= P 250,000.00
Revenue= P 50,000.00
Expenses= P 30,000.00
ASSETS = LIABILITIES + EQUITY + REVENUE - EXPENSES

Example 1- Juan dela Cruz P 500,000.00 P 250,000.00 P 250,000.00 -0- -0-

started his Coffee Shop business
by investing his Cash savings
amounting to P 500,000.00 and
borrowed P250,000.00 from ABC
Bank.

Example 2- Juan dela Cruz, on P 50,000.00 P 50,000.00

the first month of operating his (P 30,000.00)
Coffee Shop, earned a Revenue P 30,000.00
(received cash) of P 50,000.00
and incurred total expenses
(paid cash) of in the amount of P
30,000.00 (Wages of crew/ staff/
cashier, Supplies, Rent, Utility
Expenses).
P 520,000.00 P 250,000.00 P 250,000.00 P 50,000.00 P 30,000.00

P 520,000.00 P 250,000.00 P 270,000.00

Meantime, we end our lecture here. Within the week, an online discussion will be conducted to expound the
topic. Have a fruitful learning.
 *** END of LESSON 1***

UNIVERSITY OF SAINT LOUIS

Tuguegarao City
SCHOOL OF ACCOUNTANCY, BUSINESS and HOSPITALITY

First Semester
Academic Year 2021-2022
ONLINE LEARNING MODULE

ACCT 1026- Financial Accounting and Reporting

Lesson 2: The Major Accounts, Books of Accounts And

Double-Entry Bookkeeping

REMINDERS:

• Lessons will be uploaded every Monday, and submission will be every Friday of the week.

• Comply with all requirements (written outputs, projects/performance tasks examinations and the like.)  Turn in learning tasks on time to avoid backlogs.

• For this week, the following shall be your guide for the different lessons and tasks that you need to
accomplish. Be patient, read them carefully before proceeding to the tasks expected of you.

Date Topics Activities or Tasks

August 23 I. Types of major accounts The Account Read Lessons from books and handouts
A. The Five Major Accounts
August 24 B. Chart of accounts Online discussion
C. Common account titles
August 25 D. Drills on account titles Accomplish the drills and exercises
E.
August 27 Books of accounts and double-entry system Submission of Assessments
II.
The books of accounts Participate in the scheduled Quiz
Journal
A. Ledger
B. Formats of the books of accounts
C. Double-entry system
D. Normal balances of accounts
E. Rules of debits and credits
F. Ending balance of account
G. Contra and adjunct accounts
H.
I.

1.
Learning Outcomes:
Explain briefly and give examples of the five (5) major accounts

2. Describe the nature of typical account titles used in recording business transactions

3. Explain the uses and contents of the Books of Accounts and what purpose they serve.

4. Analyze business transactions using the double entry system

5. State the role of source documents in the analyzing process

6. Apply the rules of debit and credit in analyzing business transactions

LEARNING CONTENT

Last week, you learned what the accounting equation is. We also had same drills on how the accounting equation works.
We can now proceed on the discussion on the different accounts found in the accounting equation, the different books of accounts and
the double entry bookkeeping.

Let us start.

Account is defined as a basic summary device in accounting. The account is also defined as a record of
increases and decreases in assets, liabilities, equity, income or revenues and expenses. Incidentally, these
are also our five major accounts and also called the elements of financial statements.

The account resembles the letter ‘T’ as it also being depicted as a T-account.

An account has three (3) parts:

1. Account Title
2. Debit
3. Credit
Stated differently, a T-account is an informal term for a set of financial records that uses double-entry
bookkeeping. ... The title of the account is then entered just above the top horizontal line, while underneath
debits are listed on the left and credits are recorded on the right, separated by the vertical line of the letter T.
For better appreciation, here is a sample of entries using the T-account

Classification of the Five (5) Major Accounts

The five (5) major accounts are further classified based on the financial statement where they appear:
 Statement of Financial Position Accounts Statement of Income Accounts
1. ASSETS 1. INCOME
2. LIABILITIES 2. EXPENSES
3. EQUITY

The Statement of Financial Position is one of the components of a complete set of financial statements. It
shows the financial position of the business as of a given period of time.

The Income Statement is a sub-component of the Statement of Comprehensive Income, is also one of the
major components of a complete set of financial statements. It is also known as statement of Profit or Loss,
shows financial performance for a given period of time.

The Financial Statement is thoroughly discussed in Intermediate Accounting 3.

Chart of Accounts
A chart of accounts is a list of all accounts used by the business.

Sample chart of accounts is presented below:

Notes on the Chart of Accounts:

1. It follows a certain order of presentation, such that the Assets are presented first followed by the other
Statement of financial Position accounts and then the income statement accounts;
2. All the asset accounts are preceded by the number 1, liabilities by the number 2 and so on.
3. The chart of accounts may be accompanied with a handbook containing the account titles, their
definition and uses, a sample is presented below;
4. You can design your own chart of accounts; and formulate the account titles to be used.
COMMON ACCOUNT TITLES USED

Statement of Financial Position - ASSETS

CASH Includes money or equivalent that is unrestricted . example is cahd on

hand and cash in bank
ACCOUNTS RECEIVALBE Oral or written promises to pay sums of money
ALLOWANCE FOR BAD DEBTS Estimated losses on uncollectible accounts receivable
NOTES RECEIVABLE Promises to pay supported by a promissory note
INVENTORY Goods held by the business intended for sale
PREPAID SUPPLIES Unused office and other supplies
PREPAID RENT Rent paid in advance
PREPAID INSURANCE Insurance paid in advance
BUILDING Structures owned by the business used in operations
ACCUMULATED Total amount of depreciation expenses recognized since the fixed asset
DEPRECIATION was made available for use
EQUIPMENT Consists of machineries, transportation equipment, office equipment like
table, chairs, cabinets, computer equipment like server, laptops, desktop
and furniture and fixtures

Statement of Financial Position - LIABILITIES

ACCOUNTS PAYABLE Obligations to pay sums of money oral or informal.
NOTES PAYABLE Obligations to pay sums of money supported by a promissory note
INTEREST PAYABLE Interest already due but not yet paid. Most common example is interest on bank
loan
SALARIES PAYABLE Already earned by employees but not yet paid as of balance sheet date
UTILITIES PAYABLE Electric, water, telephone, cable, internet already used but not yet paid
UNEARNED INCOME Income already collected but the related services will be done in the future

Statement of Financial Position - EQUITY

OWNER’S CAPITAL What is remaining after deducting liabilities from capital (A-L = OE)
OWNER’S DRAWING Record temporary withdrawals by the owner and it is closed to the
owner’s capital at the end of the accounting period

Income Statement Accounts - INCOME

SERVICE FEES Revenue earned after rendering services
SALES Revenue earned from selling goods
INTEREST INCOME Arises from interest bearing receivables
 GAINS Income earned from the sale of assets other than Inventory.

Income Statement Accounts - EXPENSES

COST OF SALES or COST OF Value of inventories sold for a certain accounting period
GOODS SOLD
FREIGHT OUT or Seller’s expenses for delivering goods to customers
DELIVERY EXPENSE
SALARIES EXPENSE Amounts paid to employees for services rendered
RENT EXPENSE Cost of rentals used during the accounting period
UTILITIES EXPENSE Cost of power and electricity, used during the accounting period
DEPRECIATION EXPENSE A portion of the cost of a depreciable fixed asset for the accounting period
BAD DEBTS EXPENSE or Estimated business losses arising from uncollected accounts receivables
DOUBTFUL ACCOUNTS
EXPENSE
TAXES AND LICENSES Cost of local and business taxes required by the government for operating a
business. Examples are mayor’s permit, cedula, DTI permit, percentage taxes
TRANSPORTATION and TRAVEL Transportation expense is within the locality like tricycle and taxi fares while
EXPENSES Travel expenses are incurred by employees while going outside of the place
of business like plane fares, bus fares, hotel accommodations and food
allowances while on business trip
INTEREST EXPENSE Represents the cost of borrowing money. This is the amount paid to the
banks when availing of a loan.
ADVERTISING EXPENSE Cost of promotional activities intended to increase product awareness of the
public
LOSSES Come from sale of assets other than inventory that is lesser than book value
or decreases in the value of assets due to damages due to natural calamities
or other causes. An example of an ordinary loss is the decrease in the
market value of foreign currencies.
MISCELLANEOUS EXPENSE Small expenditures that are not required to be presented separately

Do you experience information overload right now? I hope you are still fine. Change your outlook now
in order to fulfill your dream of becoming a CPA, CMA, CFA, Entrepreneur into a reality. Your sacrifices
are your investment into your future.

We continue with the discussion.

The books of accounts is where we make a permanent record of our business transactions. It is a
requirement for tax audit purposes to keep a permanent file of these books.

There are two types of books:

1. The Journal-is also known as the book of original entry. It is a record of the day-to-day transaction
called journal entries that follows a chronological order (by date). The act of recording in the journal is
called “Journalizing”.
There are also different kinds of journals, depending on needs of business.

1. Special Journal which is used to record transactions of similar items come in many forms:
• Sales Journal – is used to record sales on credit terms
• Purchases Journal – is used to record purchases on account
• Cash Receipts Journal – is used to record all transactions involving receipts of cash
• Cash Disbursements Journal – is used to record all transactions involving the payments
of cash
2. The General Journal is the simplest form of the journal. It is a record of all transactions that can not be
recorded in all of the other transaction journals. In the absence of special journals, the General Journal is
used to record all journal entries.
2. The Ledger – also known as the book of final entry is used to record all transactions after the journalizing
process is done. The process of transferring amounts from the journal to the ledger is called “Posting”

The General Ledger (G/L) comes in two (2) different forms.

a) General Ledger is a record of all accounts appearing in the trial balance, a sample manual ledger
is shown below:

b) Subsidiary Ledger provides a breakdown of the balances of some controlling accounts.

Some of the most common subsidiary ledgers are the Accounts Receivable, Accounts Payable,
Fixed Assets and other S/Ls that maybe set up by the business according to its needs.

As you can see from the sample, the amount appearing on the General Ledger is transferred to the Subsidiary
ledger that with breakdown. The account and amount in the G/L is the controlling account. In the S/L entries
we come to know that the amount of P4,000 has 2 accounts of P2,000 each.

The Double-Entry System – Let me explain the double entry system by way of a diagram. A journal entry
always has two sides, the DEBIT and the CREDIT side. At all times, we maintain the equality of the debit and
credit. In layman’s terms, for every value that we give, we receive the same value in return. The key is give
and receive.

Stated in another way, a debit entry always has a corresponding credit entry.
Understanding Normal Balances of Accounts:

TIP: Hone your mastery of the rules of debit and credit. This is where your strong basic foundation
should start.

Ending Balance of an Account

Depending on the type of account, whether asset, liability or equity account, the balance is always written on
its normal balance side. It is computed as a difference between total credits and total credits.

The diagram below analyzes normal balances of accounts based on its position in the accounting equation. If
you have observed, ASSETS are on the left side of the accounting equation, so increases in assets are
recorded on the debit side and decreases on the debit side.

Contra and Adjunct Accounts:

Contra accounts are deductions from the related account. Example: Allowance for Doubtful Accounts is a
contra account to Accounts Receivable.
Adjunct Accounts – are additions to the related account. Example: Premium on Bonds Payable is an
adjunct of Bonds Payable because it is added to the carrying amount of the Bonds.
 *** END of LESSON 1***

UNIVERSITY OF SAINT LOUIS

Tuguegarao City
SCHOOL OF ACCOUNTANCY, BUSINESS and HOSPITALITY

First Semester
Academic Year 2021-2022
ONLINE LEARNING MODULE
ACCT 1026- Financial Accounting and Reporting

Lesson 3: Business Transaction and their Analysis

REMINDERS:

• Lessons will be uploaded every Monday, and submission of assessments will be every Friday of the week.
• Comply with all requirements (written outputs, projects/performance tasks examinations and the like.) • Turn in learning tasks on time to avoid
backlogs.
• For this week, the following shall be your guide for the different lessons and tasks that you need to
accomplish. Be patient, read them carefully before proceeding to the tasks expected of you.

Date Topics Activities or Tasks

August 31 I. Business transactions and their analysis Read Lessons from books and handouts
Sept 1 A. The accounting cycle Online discussion
Sept 2 B. Identifying and analyzing transactions and events Accomplish the drills and exercises
Sept 3 C. Recording transactions (Journalizing)s Submission of Assessments
Participate in the scheduled Quiz
Learning 1. Identify the different types of business documents.
Outcomes:
2. Describe the nature of business transaction.
3. Apply the rules of debit and credit to common business transactions.
4. Record accountable business transactions

LEARNING CONTENT

At this point of time, we are done discussing the accounting equation, the major accounts, books of accounts, normal balance of accounts and some
specific accounts. I do hope you have understood them by heart.
Let us now apply the learnings we had for the past two weeks. Our focus is on the bookkeeping functions primarily transaction analysis and recording,
account classification and summarizing.

Are you ready to challenge your brains?

The life of Man goes through a cycle; from birth to death, there are stages in between. From infancy, the toddler years, childhood, adolescence,
adulthood, middle age and senior years. So this is the human life cycle.
In accounting, we also follow an accounting cycle, referring to a series of sequential steps and procedures performed to accomplish the accounting
process:
To put it simply:

The accounting cycle is a multi-step process designed to

convert all of your company’s raw financial information into
financial statements.

In diagram form, may I present the accounting cycle:

Some authors include number 9 and 10 as part of the

accounting cycle and they are:

9. Preparing the Post-closing Trial Balance

10. Recording the Reversing Entries

Note: Numbers 9-10 are optional, they are for internal control purposes only. Meaningful Financial
Statements (F/S) can still be prepared without these steps.

In short, the concept of an accounting cycle makes sure that all of the money passing through your
business is actually “accounted” for.

Lesson 3 will only include steps 1 and 2; the rest of the accounting cycle will be discussed in the coming
weeks.

Let us study the accounting cycle step by step.

1. Identifying and analyzing business

transactions and documents

For me, this is the most crucial part of the

process, why? Identifying will segregate
accountable from non-accountable transactions
and events.

1. Accountable Event
– that will be recorded in the business books
as journal entries.
- will have an effect on the accounting equation:
A = L + OE
- effect means an increase or decrease in the
elements of the account equation

2. Non-accountable Event – not recorded in the books of accounts

- does not affect our assets, liabilities and owner’s equity
- just passing by
Example:

1. The daughter of the company President is getting married.

2. The daughter of the company President is getting married and he employees contributed P500 each to
come up with a nice wedding gift.
3. The daughter of the company President is getting married; the VP Finance approved P20,000
chargeable against Expense: Representation and Entertainment account to purchase a wedding gift.

Just a mental exercise. Now, tell me, which one is an accountable event and which one is not. Justify
your answer/s.
SOURCE DOCUMENTS is an integral part of your accounting records and files.

slideshare.net/mandalina/additional-notes-on-topic-4-source-documents

In short, source documents is the starting point of the accounting process.

REMEMBER:

The source document is essential to the bookkeeping and accounting process as it provides evidence
that a financial transaction has occurred. During an accounting or tax audit, source documents back
up the accounting journals and general ledger as an indisputable transaction trail.

Below are the common types of source documents:

1. Sales Invoice is issued by a seller evidencing the sale of goods and cash has been received in
payment. It shows the date, amount of transaction, description and quantity of the items sold, name
and signature of the buyer and some other particulars that are deemed appropriate and needed.
Some sellers may also include the phrase “received in good order” beside the signature of the buyer.

2. Official Receipt is issued for services rendered. It gives details as to date, amount, description of the
services rendered, signature of the party receiving cash and all other information deemed important.

It is noted that a Sales Invoice and an Official Receipt are both Principal evidence/proof of purchase. The
difference lies on what is being purchased — Sales Invoice is for the purchase of goods and Official
Receipt is for the purchase of services/lease of properties.

3. Purchase Order (PO) – is issued by the buyer to a supplier indicating among other information the
types and description, quantities and agreed prices of the goods being ordered

When small businesses are just starting, they may forego a purchase order process in favor of a more informal
approach of ordering goods. But as they grow, and their purchases become more complex, a purchasing
system needs to be established that requires the issuance of a purchase order. . The purchase order (PO) is
used as internal control measure.
 4. Delivery Receipts – evidences the shipment and delivery and the receipt of goods. A common example
is that piece of paper that a courier will make you sign when delivering your orders from online.

https://www.slideshare.net/mancnebres/source-documents-and-journalizing-process-in-a-merchandising-business

5. Bank deposit slip – with machine validation, is an evidence that a deposit has been made with the
bank stating the amount and date, breakdown of the deposit, name and Signature of the teller receiving
the deposit. I have to emphasize “with machine validation” because without this, it should not be
accepted as an evidence of deposit.

Sample of a duly Validated Deposit Slip is shown below:

6. Bank Statement – is a detailed report of deposit and withdrawal transactions with the bank for a certain
period of time issued by the bank indicating also the account’s accumulated balance. Some banks also
include a total of debits and total of credits and their average daily balance or ADB which is useful in
determining the performance of a certain account. The bank statement is being used for reconcilement
purposes.

7. Statement of Account – or a notice of billing. Common example is your utilities bills. Another one is
your school’s assessment for unpaid tuition fees. Simply stated, this is a document evidencing the
existence of unpaid account that needs to be paid or settled.

8. Credit Memorandum (CM) – issued by the seller to acknowledge the return of goods by the buyer, The
CM reduces the amount that the buyer will pay the seller at the due date.

9. Promissory Note (PN) – is a written promise to pay by the maker to pay a sum of money to the payee at
a certain future date. It may also indicate the interest rate if it is an interest-bearing note. This is PN is
received by the business from its buyers and issued by the business to its suppliers.

There are other source documents in the books. The ones mentioned above are the common documents in a
merchandising business. The bottom line is a source document supports a journal entry.

Along with the other company records, the source docume

nts are required to be kept by the business for a certain period of time for audit purposes by the regulatory
agencies. For instance, the Anti -Money laundering Council (AMLC) requires that certain documents be kept
for five (5) years in active files and another five (5) years in archive.

Very important note:

Do not record a transaction unless it is supported by a valid supporting document.

Why valid documents?

Because some sellers issue provisional receipts, or any sheet of paper not prescribed and not approved by the
BIR. These are not valid receipts.

As a guide in the analysis of transactions, it may be useful to follow the four simple steps:
• Identify the transaction from the source documents. First, determine what kind of transaction it may
be. ...
• Indicate the accounts, either assets, liabilities and/or owner’s equity, income or expense affected ...
• Identify the proper account titles to be used and determine whether increase or decrease, debit or credit.
...
• Using the rules of debit and credit, record the transaction.

https://study.com/academy/lesson/using-the-accounting-equation-analyzing-business-transactions.html

2. Recording of Accounting Transaction (Journalizing) – is the recording phase of accounting in the book
called the journal. I hope you still remember the different types and forms of the Journal. The
simplest form is the general journal.

Important Note: The journal along with the other books of accounts of the business should be
stamped by the Bureau of Internal Revenue at every start of the year.

A sample journal follows:

Notes on the following:

1. Journal Entries are recorded chronologically (arranged by date)

2. Amounts and account titles to be debited and credited follow the double entry system
3. The credit entries are indented a little to the right
4. Every entry is accompanied by a short description of the transaction
5. In some instances, a folio column is added to write the reference number. The posting reference
facilitates referencing between the journal and the ledger. It is used in the posting process
Simple vs. Compound entry:

As the name suggests, a compound entry has two or more debits or credits. A simple entry has only one debit
and only one credit entry.

Your thoughts!
Why would an increase in Income be treated as an increase in Owner’s Equity?

Proceed to the Drill 1 portion of the module

END OF LESSON 3

REFERENCES

Textbooks

1. Ballada, W. (2019). Basic Financial Accounting and Reporting. Manila: DomDane Publishers.
2. Cabrera, E.(2017) Fundamentals of Accounting Volume I, GIC Enterprises & Co., Inc., Manila
3. Millan, Z. V. (2020). Financial Accounting and Reporting (Fundamentals). Baguio City: Bandolin Enterprise.
4. Valencia, E. and Roxas, G. (2017), Basic Accounting, Valencia Educational Supply
5. Valix, C. and Peralta, J. (2018). Financial Accounting Volume I GIC Enterprises & Co., Inc., Manila

Online Reference

1. Introduction to accounting, https://courses.lumenlearning.com/sac-finaccounting/chapter/chapter-1/

2. Accounting Basic https://www.accountingcoach.com/accounting-basics/explanation
3. Basic Accounting. https://www.bizfilings.com/toolkit/research-topics/finance/basic-accounting/theaccounting-system-
and-accounting-basics
4. Basic accounting and bookkeeping lessons, http://www.moneyinstructor.com/accounting.asp
5. Financial Accounting. https://www.accountingcoach.com/financial-accounting/explanation
6. Accounting Tutorials for Beginners. https://www.guru99.com/accounting.html

Assessment/Evaluation: Answers to this page is to be written in a separate sheet of paper.

DRILL 1: Analyzing and Recording Business Transactions

The following is a typical of the daily activities in the Morning Dew Motor Repair Shop for the month of August
2021:

May 06 The owner, A. Antonio, invested P100,000 cash to start the business
07 Signed a contract of rent of P4,000 on the space occupied by the shop
08 Bought for cash repair equipment worth P30,000
09 Paid P2,000 for repair supplies bought from U-save Trading
10 Hired a chief mechanic at an agreed monthly pay of P6,000
11 Repair tools valued at P9,000 were ordered from Timog Machine Tools
13 Cash of P1,000 was received from Mr. Alejo for repair services done on his automobile
14 Two shop helpers were hired at a daily wage of P360 each
15 Sent a bill for P3500 to Quality Gravel and Sand for repair work done on his automobile
17 Received the tools ordered from Timog Machine Tools and paid cash for them.
18 Paid the wages of the shop helpers for the week, P3,600
20 Bought repair supplies worth P4,000 from U-Save Trading payable on or before the end of the
month.
21 Collected P2,000 from Quality Gravel and Sand
22 Placed an order for repair supplies costing P2,000 with Casa Blanca Trading
24 Gave Cash of P4,000 to U-save Trading in full payment of the account with them
25 Wages of shop helpers were paid, P960.
28 Collected the balance of Quality Gravel and Sand’s account
 29 Received P5,500 cash from various customers for repair services rendered
30 Paid the rent for the month to Dona Ana Building.
31 The chief mechanic was paid 2/3 of his monthly salary in cash.

Instruction:
From the above information, enumerate by the given transaction date the non-accountable transactions and
state the reason/s for your answer.
1. Give the two-fold effect of those which in your opinion are accountable business transactions from the
point of view of Morning Dew Motor Repair Shop. Use this format.

Accounts Affected (A, Type of Account Increase or Debit or Credit

Transaction L, OE) (Specific Account Decrease
Date Title)
1. 1. 1 1
2. 2. 2 2
1. 1 1 1
2. 2 2 2
1. 1. 1. 1.
2. 2. 2. 2.
1. 1. 1. 1.
2. 2. 2. 2.
1. 2. 1. 1. 1.
2. 2. 2.

3. Prepare the necessary journal entries in prescribed format (as discussed above.
 UNIVERSITY OF SAINT LOUIS
Tuguegarao City

SCHOOL OF ACCOUNTANCY, BUSINESS and HOSPITALITY

First Semester
Academic Year 2021-2022

ONLINE LEARNING MODULE

ACCT 1026- Financial Accounting and Reporting
Lesson 4: Posting of Transactions and Preparation of Trial Balance
REMINDERS:
 Lessons will be uploaded every Monday, and submission of assessments will be every Friday of the week.
 Comply with all requirements (written outputs, projects/performance tasks examinations and the like.)
 Turn in learning tasks on time to avoid backlogs.
 For this week, the following shall be your guide for the different lessons and tasks that you need to accomplish. Be patient, read them carefully before proceeding to the
tasks expected of you.

Date Topics Activities or Tasks

Sept 6 I. Posting to the ledger Read Lessons from books and handouts
Sept 7 A. Posting of Transactions Online discussion
Sept 8 B. Preparation of the Unadjusted Trial Accomplish the drills and exercises
Sept 9 Balance Submission of Assessments
Sept 10 Participate in the scheduled Quiz
Learning At the end of this module, you are expected to :
Outcomes:
1. Describe the General Ledger and understand what purpose it serves.
2. Post entries from the general journal to the general ledger
3. Prepare and explain the use of a trial balance
4. Perform steps in locating errors

LEARNING CONTENT

Are you burnout? Mainly because of COVID and secondly, your assessments? Read the quotes below . . . again and again, if you are.

Yes, the right frame of mind is called right A T T I T U D E, all caps for emphasis. If you are not yet inspired, read the story of
David and Goliath in the holy Bible..........................................................................Believe you can, and you can!!!.

Let us continue our study of the accounting cycle.

Steps in the Accounting Cycle:

1. Identifying and Analyzing – finished

2. Recording or Journalizing - finished
3. Posting to the Ledger –It is done by transferring the data in the Journal to the General Ledger for
classification.
4. Preparing the Unadjusted Trial Balance –It aims to periodically test the equality of the total debits and
total credits in the general ledger. Normally, this is done at the end of each month.

Posting to the General Ledger

General Ledger (GL) is the book of final entry while the Journal is the book of original entry. The
best way to explain the purpose of the general ledger is through a diagram:
Explaining the purpose of the General Ledger is perhaps a difficult task. One reason is because in this age of
computers and information technology, the General Ledger does not any longer have an easily identifiable physical
form. Most large companies have their own system that will post transactions daily to the Journal then to the General
Ledger and from the Ledger to the Subsidiary Ledgers. And all the Accountant has to do is print a daily report, perform
reconciliation of balances between the General Ledger and Subsidiary Accounts and maintain a permanent file of
these reports.

For companies that are still using the manual system, the standard format of the general ledger for Cash is
shown below:

There are three columns for recording money - Debit, Credit and Balance. There is one page in the General
Ledger for each Account, and typically the number of Accounts will be many, depending on the Chart of
Accounts.

The manual process of posting involves transferring the date, debit and credit totals of accounts from the General
Journal to the G/L. A recorded journal entry is copied to its specific account in the GL.

Purpose: To classify the effects of business transactions according to the five (5) elements of financial
statements: Assets, Liabilities, Owner’s Equity, Income and Expense. This will greatly help the accountant to
prepare the financial statements in an orderly and timely manner.

For classroom discussion, we will be using the informal form of the G/L which is the T-account.

Example:
On January 02, 2020, Pedro Penduco started his locksmith business investing cash of P10,000.
 Proceed to the Drill 1 portion of the module

The Trial Balance

Some Important Notes:

 Correct results of posting depend to a great extent on the correctness of the entries in the general
journal

 Errors in journalizing should be avoided as much as possible because any error in the journal entries such
as wrong amounts or wrong accounts debited and credited will lead to wrong results of posting

Proceed to Drill 2 of the module ,

Trial Balance out of balance if the total debits and total credits are not equal. This is a positive proof of the
existence of one or more errors.

The chief causes of errors are:

1. Posting an item to the wrong side of the account

2. A mistake in copying when transferring a balance from the ledger account to the trial balance.
3. Omission of the posting of either a debit or credit entry in the journal.
4. Posting the same item twice
5. Wrong addition or subtraction in finding the balance of an account.

Location of Errors

The following guides may help in the prompt location of errors:

 A difference of P0.01, P0.10, P1, P100, etc. suggests that an error has been made in addition or
subtraction

 A difference of 9 or a multiple of 9 indicates transposition, that is, the order of the figures is
reversed. For example, 25 is written as 52 or 38 is written as 83.

 A difference divisible by 2 indicates an error in posting to the wrong side of the account or entering the
account balance in the wrong column of the trial balance.

 A difference divisible by 9 or 99 indicates a slide or misplacement of a decimal point. For example, P50
is written as P5.00.

Tip: If the trial balance is out of balance, a good plan to locate the error/s is to check the work from the
trial balance to the journal entries rather than from the journal entries to the trial balance.
 Your thoughts!
If what is posted to the General Ledger is the record of the same transaction in the journal, why is
maintenance of the General Ledger still necessary? Don’t you think it is duplicative, time
REFERENCES
consuming and boring?
Textbooks

1. Ballada, W. (2019). Basic Financial Accounting and Reporting. Manila: DomDane Publishers.
2. Cabrera, E.(2017) Fundamentals of Accounting Volume I, GIC Enterprises & Co., Inc., Manila
3. Millan, Z. V. (2020). Financial Accounting and Reporting (Fundamentals). Baguio City: Bandolin Enterprise.
4. Valencia, E. and Roxas, G. (2017), Basic Accounting, Valencia Educational Supply
5. Valix, C. and Peralta, J. (2018). Financial Accounting Volume I GIC Enterprises & Co., Inc., Manila

Electronic Resource:
1. Accounting Basic https://www.accountingcoach.com/accounting-basics/explanation
2. Basic Accounting. https://www.bizfilings.com/toolkit/research-topics/finance/basic-accounting/the- accounting-system-and-accounting-basics
3. Basic accounting and bookkeeping lessons, http://www.moneyinstructor.com/accounting.asp
4. Financial Accounting. https://www.accountingcoach.com/financial-accounting/explanation
5. Accounting Tutorials for Beginners. https://www.guru99.com/accounting.html
6. https://corporatefinanceinstitute.com/resources/knowledge/accounting/accounting-equation/
7. https://bobsteelecpa.com/accounting-equation-account-types-and-the-double-entry-accounting- equation/
8. https://www.bookstime.com/what-is-the-accounting-equation
9. https://www.accountingcoach.com/blog/expanded-accounting-equation
10. https://accounting-simplified.com/equity.html
11. https://www.investopedia.com/
12. https://courses.lumenlearning.com/sac-finaccounting/chapter/the-basic-accounting-equation/

Assessment/Evaluation: Answers to this page is to be written in a separate sheet of paper.

DRILL 1: JOURNALIZING AND POSTING

The following were the transactions of Entity A during the period:

Date Transactions
Jan. 8 Services worth ₱150,000 were rendered for cash.
Jan. 9 Services worth ₱200,000 were rendered on account.
Jan. 10 Cash amounting to ₱25,000 was disbursed for advertising expense.
Jan. 11 Accounts receivable of ₱180,000 was collected.
Jan. 12 The owner made a temporary withdrawal of ₱10,000 cash from the business.

Requirements:
a. Provide the journal entries.
Post the journal entries to the ledger then determine the ending balances of the accounts. Use ledger accounts for this
purpose. Arrange the accounts in this order: Assets, Liabilities, Equity, Income and Expenses.

DRILL 2: JOURNALIZING, POSTING AND UNADJUSTED TRIAL BALANCE

Entity A started operation on January 1, 20x1. The following were the transactions during the first week of
operations:

Jan. Transactions
1 The owner provided ₱600,000 cash as initial investment to the business.
2 The business acquired a building for ₱400,000 cash.
3 The business acquired office equipment for ₱100,000 cash.
4 The business purchased supplies for ₱20,000 cash. The business uses a prepaid asset
account.
5 The business rendered services worth ₱150,000 on cash basis.
6 The business rendered services worth ₱100,000 on account.
7 The business paid ₱25,000 salaries expense.

Requirements:
a. Provide the journal entries.
b. Post the journal entries to the ledger. Arrange you’re the accounts in this order: Assets, Liabilities, Equity,
Income and Expenses.
c. Prepare the unadjusted trial balance.