Review of Journal Entries, T-Accounts, General Ledger, and Trial Balance

Review of Journal
Entries, T-Accounts,
General Ledger,
and Trial Balance
JOURNAL ENTRIES
Recording Transactions in the Journal
THE JOURNAL
- is a chronological record of events or business transactions showing all the effects of each
transaction in terms of debits and credits. Because transactions are initially recorded in the
journal.
- It is also called the book of original entry.
General Journal - is the simplest journal
A journal entry should contain the following:

1. Date. Write the month of the first transaction unless there is a change in month for the
succeeding transactions or a new page is used.
2. Account Titles and Explanation. Write the debit account at the extreme left of the first line
while the credit account is indented half-inch on the next line. The explanation describing the
transaction is written on the extreme left of the next line below the credit. Remember to skip
one line before proceeding to the next transaction.
3. P.R (Posting Reference). Write the corresponding account number here once the entry is
posted. Meanwhile, it is left blank until the posting has been done.
4. Debit. Under this column, write the debit amount for each debit account.
5. Credit. Under this column, write the credit amount for each credit account.
Presume that May Daya established MaDaya Consultancy Firm with an initial investment
of P800,000 on August 1, 2017. The journal entry is shown below.
General Journal
Date Account Titles and Explanation P.R Debit Credit
2017
Aug 1 Cash 800,000
Daya, Capital 800,000
Initial Investment
The Simple and Compound Entry
SIMPLE ENTRY COMPOUND ENTRY

When only two accounts are affected. Where there are there are three or
Where there is only one debit account more accounts.
and one credit account
Journalizing the Transactions
Journalizing
- is the process of recording transaction in the
journal after it has been and measured.
In journalizing transactions, the double

entry system is used. In this case, two or
more accounts are affected by each
transaction. It follows that for every debit,
a corresponding credit is made. The total
debits should equal total credits for every
transaction. In this way the equality of the
accounting equation is maintained.
Rules for Debit and Credit
You debit to show: You credit to show:
1. Increase in assets 1. Decrease in assets

2. Decrease in liabilities 2. Increase in liabilities
3. Decrease in owner’s equity 3. Increase in owner’s equity
- Owner’s withdrawal - Initial investment
- Expenses - Additional investment
Revenue/income
The Analysis of Transaction
Following are the steps involved to analyze transactions:
1. From the business document, determine the kind of

transaction or exchange made.
2. Analyze the transaction to determine the accounts affected.
They can either affect the assets, liabilities, owner’s equity,
revenue, or expenses accounts.
3. Determine the effect of the transaction on the accounts
affected. The transaction can either increase or decrease
the accounts.
4. Apply the rules of debit and credit to identify whether the
accounts affected should be debited or credited to show
the corresponding increase or decrease.
Illustrative Problem
The following are transactions for MaDaya Consultancy Firm for the month of August. They will be
recorded using the double entry system. To analyze each transaction the following shall be used to
show the effect on the account as follows: A (for Asset), L (for Liability), or OE (Owner’s Equity). The
effects on owner’s equity is subclassified as follows: OE:R (Revenue) and OE:E (Expenses).
Initial Investment Entry

Aug. 1 May Daya is a masters degree holder in
business administration. She worked for ten Dr Cr
years in the corporate world holding different
managerial positions. Finally, May decided to Cash (A) 800,000
quit her job and establish a consultancy firm. Daya, Capital (OE) 800,000
She invests P800,000 in this initial endeavor.
Initial investment
Analysis Assets increased. Owner’s equity inc.
Rules Debit inc in assets. Credit inc in OE
Entry Inc in assets is recorded by a debit to

Cash. Inc in OE is recorded by credit to
Daya, Capital.
Issuance of Note for Cash Entry

Aug. 2 May Daya issued a promissory note for
a P500,000 loan payable after on year. Dr Cr
Analysis Assets increased. Liabilities increased. Cash (A) 500,000
Notes payable (L) 500,000
Rules Debit increases in assets. Credit inc. in
Liabilities. Borrowed money issuing a promissory note
Cash. Inc in Liabilities is recorded by
to notes payable.
Acquisition of Office Equipment, Paying DP, and
Entry
the Balance on account
Aug. 5 Acquired office equipment from Eastern
Marketing P50,000 paying P10,000 and the Dr Cr
balance at the end of the month.
Office Equipment (A) 50,000
Analysis Assets increased. Assets decreased. Cash (A) 10,000
Liabilities increased. Accounts payable (L) 40,000
Rules Debit increases in assets. Credit dec. in
Assets. Credit increases in Liabilities Bought office equipment paying cash and the
Entry Inc in assets is recorded by a debit to balance on account.
Office Equipment. Decrease in assets is
recorded by a credit to cash. Increase
in liabilities is recorded by credit to
Accounts payable.
Events not affecting the Accounting Equation (no journal entry)
Aug 7 Hired office assistant with P8,000 monthly salary. The office
Assistant started work on the following day.
There is no entry necessary at this point as the hiring of the

office assistant has no effect on the assets, liabilities, and owner’s equity.
Aug 7 Called Ace Supplies and ordered office supplies worth,

P7,000.
There is no entry necessary at this point as the ordering of

the office supplies has no effect on the assets, liabilities, and owner’s
equity. No delivery of the supplies has been made thereby no liability
arises.
Payment of Insurance Premiums Entry

Aug. 7 Paid Agno Insurance Co. P9,000 for one
year insurance premium. Dr Cr
Analysis Assets increased. Another Assets dec. Prepaid Insurance (A) 9,000
Cash (A) 9,000
Assets. Paid one year insurance premium

Prepaid Insurance. Decrease in assets
is recorded by a credit to Cash.
Advance Payment of Rental Entry

Aug. 8 Rented office space and paid three
months rent in advance, P45,000. Dr Cr
Analysis Assets increased. Another Assets dec. Prepaid Rent (A) 45,000
Cash (A) 45,000
Assets. Paid three months in advance

Prepaid Rent. Decrease in assets is
recorded by a credit to Cash.
Purchase of Office Supplies on Account Entry

Aug. 9 The P7,000 office supplies ordered from
Ace Supplies were delivered on account. Dr Cr
Analysis Assets increased. Liabilities increased. Office Supplies (A) 7,000
Accounts payable (L) 7,000
Rules Debit increases in assets. Credit inc.
in liabilities. Purchased office supplies on account

Office Supplies. Increases in liabilities
is recorded by a credit to Accounts
payable.
Income Earned on Account Entry

Aug. 10 Consultation services rendered on
account to MaCuenta Company, P100,000 Dr Cr
Analysis Assets increased. Owner’s Equity inc. Accounts Receivable (A) 100,000
Consultancy Fees (OE:R) 100,000
Rules Debit increases in assets. Credit inc.
in owner’s equity Consultancy Services rendered on account

Accounts receivable. Increases in
owner’s equity is recorded by a credit
Consultancy Fees.
Partial Settlement of Accounts Payable Entry

Aug. 11 Paid Ace Supplies P5,000 of the amount
owed. Dr Cr
Analysis Assets decreased. Liabilities decreased Accounts payable (L) 5,000
Cash (A) 5,000
Rules Debit decreases in liabilities. Credit dec
in assets. Made partial payment to Ace Supplies
Entry Decrease in liabilities is recorded by a

debit to accounts payable. Decreases
in assets is recorded by a credit to cash
Partial Collection of Accounts Receivable Entry

Aug. 12 Received P50,000 from MaCuenta
Company as partial payment. Dr Cr
Analysis An asset increased. Another asset dec. Cash (A) 50,000
Accounts Receivable (A) 50,000
Rules Debit increases in assets. Credit dec in
assets. Received cash as partial collection from
MaCuenta Co.
Entry Increase in assets is recorded by a debit
to cash. Decrease in assets is recorded
by a credit to accounts receivable.
Collection of Unearned Income Entry

Aug. 14 Received P60,000 cash for six-month
consultation services to Nik Co. to start next Dr Cr
month.
Cash (A) 60,000
Analysis Asset increased. Liabilities increased. Unearned Consultancy Fees (L) 60,000
Rules Debit increases in assets. Credit inc. in Received cash for consultancy services to be
Liabilities. rendered.

to cash. Increase in liabilities is recorded
by a credit to Unearned Consultancy Fee
Cash Withdrawal by Owner for Personal Use Entry

Aug. 18 May Daya withdrew P18,000 for personal
use. Dr Cr
Analysis Asset decreased. Owner’s equity dec. Daya, Drawing (OE) 18,000
Cash (A) 18,000
Rules Debit decreases in owner’s equity.
Credit decreases in assets. May Daya withdrew cash for personal use.
Entry Decreases in owner’s equity is recorded

by a debit to Daya, Drawing. Decreases
in assets is recorded by a credit to cash.
Cash Collection from Income Earned Entry

Aug. 20 Received cash from Ms Sue Gapa P30,000
for consultation services rendered. Dr Cr
Analysis Asset increased. Owner’s equity inc. Cash (A) 30,000
Consultancy Fees (OE:R) 30,000
Rules Debit increases in assets. Credit inc. in
Owner’s equity. Cash collection from services

to cash. Increase in owner’s equity is
recorded by a credit to Consultancy Fee
Payment of Salaries Entry

Aug. 23 Paid assistant’s salary for the month,
P8,000 Dr Cr
Analysis Asset decreased. Owner’s equity dec. Salaries Expense (OE:E) 8,000
Cash (A) 8,000
Rules Debit decreases in owner’s equity.
Credit decreases in assets. Paid assistant’s salary for the month
Entry Decrease in owner’s equity is recorded

by a debit to salaries expense.
Decreases in assets is recorded by a
Credit to cash.
Payment of Expenses Incurred/Consumed Entry

Aug. 25 Paid electric bill for the month, P5,000
Dr Cr
Analysis Asset decreased. Owner’s equity dec.
Utilities Expense (OE:E) 5,000
Rules Debit decreases in owner’s equity. Cash (A) 5,000
Credit decreases in assets.
Paid electric bill for the month
by a debit to utilities expense.
Decreases in assets is recorded by a
Credit to cash.
Payment of Expenses already Consumed/Incurred Entry
(Accrued Expenses)
Aug. 30 Received bill from Maynilad.
Dr Cr
Analysis Liabilities increased. Owner’s equity dec
Utilities Expense (OE:E) 450
Rules Debit decreases in owner’s equity. Utilities Payable (L) 450
Credit increases in liabilities.
Received bill from Maynilad
by a debit to utilities expense.
Increase in liabilities is recorded by a
credit to utilities payable.
Drill 1
Journalize the following transactions of Ali Baba
Tutorials for the month of June.
2017
June 1 Alibaba deposited P600,000 in the account of

the company. He also invested a furniture
valued at P50,000.
3 Bought P5,000 supplies from National Book

Store on account.
5 Tutorial service rendered to Ms. Ta Lino on

Account, P15,000.
7 Tutorial services rendered to various clients

for cash, P18,000.
Drill 1
Journalize the following transactions of Ali Baba
Tutorials for the month of June.
2017
June 15 Paid account with National Book store.
18 Collected P5,000 from Ms Ta Lino.
20 Received water bill, P400.
28 Paid electricity for the month, P4,480.
30 Paid water bill.

Review of Journal Entries, T-Accounts, General Ledger, and Trial Balance

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Review of Journal

A journal entry should contain the following:

Date Account Titles and Explanation P.R Debit Credit

Aug 1 Cash 800,000

Daya, Capital 800,000

SIMPLE ENTRY COMPOUND ENTRY

In journalizing transactions, the double

1. Increase in assets 1. Decrease in assets

1. From the business document, determine the kind of

Initial Investment Entry

Rules Debit inc in assets. Credit inc in OE

Entry Inc in assets is recorded by a debit to

Issuance of Note for Cash Entry

There is no entry necessary at this point as the hiring of the

Aug 7 Called Ace Supplies and ordered office supplies worth,

There is no entry necessary at this point as the ordering of

Payment of Insurance Premiums Entry

Entry Inc in assets is recorded by a debit to

Advance Payment of Rental Entry

Entry Inc in assets is recorded by a debit to

Purchase of Office Supplies on Account Entry

Entry Inc in assets is recorded by a debit to

Income Earned on Account Entry

Entry Inc in assets is recorded by a debit to

Partial Settlement of Accounts Payable Entry

Entry Decrease in liabilities is recorded by a

Partial Collection of Accounts Receivable Entry

Collection of Unearned Income Entry

Entry Increase in assets is recorded by a debit

Cash Withdrawal by Owner for Personal Use Entry

Entry Decreases in owner’s equity is recorded

Cash Collection from Income Earned Entry

Entry Increase in assets is recorded by a debit

Payment of Salaries Entry

Entry Decrease in owner’s equity is recorded

Payment of Expenses Incurred/Consumed Entry

June 1 Alibaba deposited P600,000 in the account of

3 Bought P5,000 supplies from National Book

5 Tutorial service rendered to Ms. Ta Lino on

7 Tutorial services rendered to various clients

June 15 Paid account with National Book store.

18 Collected P5,000 from Ms Ta Lino.

20 Received water bill, P400.

28 Paid electricity for the month, P4,480.

30 Paid water bill.

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