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Fabm1 Module 6 PDF Free
Fabm1 Module 6 PDF Free
Fundamentals of
Accountancy, Business and
Management 1
Module 6
The Business Transactions and their Analysis to Include Definition
and
Nature of Business Transactions, Types of Source or Business
Documents, and the Rules of Debits and Credits
Department of Education Republic of the Philippines
What I Need To Know
Module Content
What’s In
Activity 1. Review
Instructions: differentiate the following terms. Write your answer on the line provided.
1. Service business
________________________________________________________.
2. Merchandising business
______________________________________________________.
3. Manufacturing business
________________________________________________________.
What’s New
Activity 2. Write the analysis, rules and journal entry of the business transaction illustrated below.
The following are transactions for Anime World Gallery for the month of May. They will
be recorded using the double-entry system. To analyze each transaction the following
shall be used to show the effect on the accounts as follows: A (for Asset), L (for liability),
or OE (Owner’s Equity). The effect on owner’s equity is sub classified as follows: OE:R
(Revenue) and OE:E (expenses).
Example on May 2:
May 2 Gisel Ong loves to watch anime. She draws posters of colorful anime
characters. Sometimes she displays them in her office. To her surprise ,
many anime fans buy her drawings and paintings and place special
orders for Anime characters of their choice. Thus, Gisel decided to open
Anime World Gallery. Gisel invested P300,000 in this initial endeavor.
Analysis Assets increased. Owner’s equity increased.
Rules Debit increases in assets. Credit increases in owner’s equity.
Entry Increase in assets is recorded by a debit to cash. Increase in owner’s
equity is recorded by a credit to Ong, Capital.
Your turn
Issuance of Note for Cash
May 3 Gisel Ong Issued a promissory note for a P100,000 loan from Allay
Bank. The note carries a 12% interest per annum. The interest and the
principal are payable after one year.
Analysis ___________________________________________________.
Rules ___________________________________________________.
Entry ___________________________________________________.
____________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________ ____________
____________________________________________________.
Acquisition of Office Equipment for Cash
May 5 Ms. Ong acquired office equipment to be used for the office paying
P180,000 in cash.
Analysis ___________________________________________________.
Rules ___________________________________________________.
Entry ___________________________________________________.
____________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________ ____________
____________________________________________________.
May 5 Ms. Ong acquired furniture from Bloom’s costing P40,000 paying
P12,000 and the balance at the end of the month. (Note: A
compound entry is needed in this transaction.)
Analysis ___________________________________________________.
Rules ___________________________________________________.
Entry ___________________________________________________.
____________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________ ____________
____________________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________ ____________
____________________________________________________.
May 7 Ms. Ong paid Asia Insurance Co. P10,800 for one year insurance of the
gallery.
Analysis ___________________________________________________.
Rules ___________________________________________________.
Entry ___________________________________________________.
____________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________ ____________
____________________________________________________.
There is no entry necessary at this point as the hiring of the student helper
has no effect on the assets, liabilities, and owner’s equity.
May 8 Called National Book Store and ordered art supplies worth P7,200.
There is no entry necessary at this point as the ordering of the art supplies
has no effect on the assets, liabilities, and owner’s equity.
Question: Why?
Answer: _________________________________________________.
May 8 The P7,200. worth of art supplies ordered from National Book Store
were delivered on account.
Analysis ___________________________________________________.
Rules ___________________________________________________.
Entry ___________________________________________________.
____________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________ ____________
____________________________________________________.
May 11 An oil painting of Naruto and an acrylic painting of L was delivered to Mr.
Ku To. Gisel Ong billed Mr. Ku To P120,000 for the painting delivered.
Analysis ___________________________________________________.
Rules ___________________________________________________.
Entry ___________________________________________________.
____________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________ ____________
____________________________________________________.
May 12 Ms. Ong paid National Book Store P3,000 of the amount owned.
Analysis ___________________________________________________.
Rules ___________________________________________________.
Entry ___________________________________________________.
____________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________ ____________
____________________________________________________.
May 15 Ms. Ong received P50,000 from Mr. Ku To as partial payment for the
anime painting delivered last May 11.
Analysis ___________________________________________________.
Rules ___________________________________________________.
Entry ___________________________________________________.
____________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________ ____________
____________________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________ ____________
____________________________________________________.
May 20 Ms. Ong received P80,000 cash for a contract to paint Lelouch.
Analysis ___________________________________________________.
Rules ___________________________________________________.
Entry ___________________________________________________.
____________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________
____________
Cash Collection from Income Earned
May 23 Gisel Ong received cash from Ms. Uto San P90,000 for a charcoal poster
of Kirito.
Analysis ___________________________________________________.
Rules ___________________________________________________.
Entry ___________________________________________________.
____________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________ ____________
____________________________________________________.
Payment of Salaries
May 29 Ms. Ong paid helper’s salary for the month, P4,000.
Analysis ___________________________________________________.
Rules ___________________________________________________.
Entry ___________________________________________________.
____________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________ ____________
____________________________________________________.
Payment of Expenses Incurred / Consumed
May 29 Gisel Ong paid water bill of P540 for the month.
Analysis ___________________________________________________.
Rules ___________________________________________________.
Entry ___________________________________________________.
____________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________ ____________
____________________________________________________.
Show entry:
Dr Cr
____________________ ___________
____________________ ____________
____________________________________________________.
What Is It
What is a JOURNAL?
A journal is a chronological record of events and business transactions showing all the effects
of each transaction in terms of debit and credits. Because transactions are initially recorded in the
journal, it is called the book of original entry. The simplest journal is the general journal.
A journal entry should contain the following:
1. Date. Write the month on the first transaction unless there is a change in month for the
succeeding transactions or a new page is used.
2. Account titles and explanations. Write the debit account on the extreme left of the first line
and indent the credit account half- inch on the next line. The explanation describing the
transaction is written on the extreme left of the next line below the credit.
3. P.R. (Posting Reference). Write the corresponding account number here once the entry is
posted. However, 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 Gisel Ong established Anime World Gallery with an initial investment of
P300,00 on May 2,2018. The journal entry is shown on the next page.
When only two accounts are affected, you call this a simple entry where there is only one
debit account and one credit account. The previous example where the owner, Gisel Ong, made
an initial investment is a simple entry. In some cases, a transaction would require the use of three
or more accounts, in which case the entry is called a compound entry.
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 of decrease the accounts.
4. Apply the rules of debited and credited to show the corresponding increase or
What’s More
Activity 3. Essay
Instructions. Answer the question briefly based on your own understanding. Write
your answer on the lines provided.
1. What is a journal?
________________________________________________________________
______________________.
2. What is a difference between a simple entry and a compound entry?
________________________________________________________________
________________________________________________________________
____________________________________________.
3. Discuss the analysis of a transaction.
_______________________________________________________________
_
_______________________________________________________________
_
_______________________________________________________________
_
_____________________________________.
4. State the rules of debit and credit.
_______________________________________________________________
_
_______________________________________________________________
_
_________________________________________________.
Answer Key:
Activity 1. Review
1. Engaged in the rendering of service
2. Engaged in buying and selling goods
3. Engaged in the reproduction of items to be sold.
Activity 2: Identification
May 3
Analysis: Asset Increase, Liabilities Increased.
Rules: Debit increases in assets. Credit increases in liabilities.
Entry: Increase in assets is recorded by a debit to cash. Increase in liabilities is recorded by
a credit to notes payable.
Journal entry illustration:
Dr Cr
Cash (A) 100,000
Notes Payable (L) 100,000
Borrowed money from the bank by
Issuing a promissory note
May 5
Dr Cr
Office Equipment (A) 180,000
Cash (A) 180,000
Purchased office equipment for cash
May 5
May 6
Analysis:
Rules:
Entry:
May 7
Analysis: An asset increased. Another asset decreased.
Rules: Debit increases in assets. Credit increases in assets.
Entry: Increase in assets is recorded by a debit to prepaid insurance. Decrease in assets is
recorded by a credit to cash.
Journal entry illustration:
Dr Cr
Prepaid Rent (A) 10,800
Cash (A) 10,800
Paid one year insurance premium
May 7
There is no entry necessary at this point as the hiring of the student helper has no effect on
the assets, liabilities, and owner’s equity.
May 8
There is no entry necessary at this point as the ordering of the art supplies has no effect on
the assets, liabilities, and owner’s equity. No delivery of the supplies has been made, thereby no
liability arises.
Dr Cr
Art Supplies (A) 7,200
Accounts Payable (L) 7,200
Purchased art supplies on account
May 11
Dr Cr
Accounts Payable (L) 3,000
Cash (A) 3,000
Made partial payment to
National Book Store
May 15
Analysis: An asset increased. Another asset decreased.
Rules: Debit increases in assets. Credit decreases in assets.
Entry: Increase in assets is recorded by a debit to cash. Decrease in assets is recorded by
a credit to accounts receivable.
Journal entry illustration:
Dr Cr
Cash (A) 50,000
Accounts Receivable (A) 50,000
Received cash as partial collection from Mr. Ku To
May 18
Analysis: Assets decreased. Owner’s equity decreased.
Rules: Debit decreases in owner’s equity. Credit decreases in assets.
Entry: Decrease in owner’s equity is recorded by a debit to Ong, Drawing. Decrease in
assets is recorded by a credit to cash.
Journal entry illustration:
Dr Cr
Ong, Drawing (OE) 18,000
Cash (A) 18,000
Withdrew cash for personal use
May 20
Analysis: Assets increased. Liabilities increased.
Rules: Debit increases assets. Credit increases in liabilities.
Entry: increase in assets is recorded by a debit to cash. Increase in liabilities is recorded by
a credit to unearned painting revenue.
Journal entry illustration:
Dr Cr
Cash (A) 80,000
Unearned Painting Revenue (L) 80,000
Received cash for painting services to be rendered
May 23
Analysis: Assets increased. Owner’s equity increased.
Rules: Debit increases in assets. Credit increases in owner’s equity.
Entry: Increase in assets is recorded by a debit to cash. Increase in owner’s equity is
recorded by a credit to painting revenue.
Journal entry illustration:
Dr Cr
Cash (A) 90,000
Painting Revenue (OE:R) 90,000
Received cash for a charcoal painting
May 25
Analysis: Assets decreased. Owner’s equity decreased.
Rules: Debit decreases in owner’s equity. Credit decreases in assets.
Entry: Decrease in owner’s equity is recorded by a debit to salaries expense. Decrease in
assets is recorded by a credit to cash.
Journal entry illustration:
Dr Cr
Salaries expense (OE:E) 4,000
Cash (A) 4,000
Paid helper’s salary for the month
May 29
Analysis: Assets decreased. Owner’s equity decreased.
Rules: Debit decreases in owner’s equity. Credit decreases in assets.
Entry: Decrease in owner’s equity is recorded by a debit to utilities expense. Decrease in
assets is recorded by a credit to cash.
Journal entry illustration:
Dr Cr
Utilities expense (OE:E) 540
Cash (A) 540
Paid water bill for the month
May 30
Analysis: Liabilities increased. Owner’s equity decreased.
Rules: Debit decreases in owner’s equity. Owner’s equity decreased.
Entry: Decrease in owner’s equity is recorded by a debit to utilities expense. Increase in
liabilities is recorded by a credit to utilities payable.
Journal entry illustration:
Dr Cr
Utilities expense (OE:E) 4,500
Utilities Payable (L) 4,500
Received bill from Meralco