LICEO DE LA SALLE SENIOR HIGH SCHOOL

FIRST SEMESTER | QUARTER 1

AY 2020 – 2021 | FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS, AND MANAGEMENT 1

TOPIC 9: JOURNALIZING OF TRANSACTIONS

We will now start recording the transactions of Del Mundo Landscape Specialist that transpired
during the month of October. You may also refer to the Chart of Accounts covered in the
previous topic for the complete list of account titles used by the business. This example was
adopted from the textbook of Ballada, 2020.

Initial Investment

Oct. 1 The owner of the Del Mundo Landscape Specialist, Galicano Del Mundo, invests
Php 450,000 to open the business.

Analysis Increase in assets; increase in owner’s equity

Rules Increases in assets are recorded by debits.
Increases in owner’s equity are recorded by credits.
Entry Increase in assets is recorded by a debit to cash.
Increase in owner’s equity is recorded by a credit to Del Mundo, Capital.

Journal Entry:

Oct Dr. Cr.

1 Cash (A) 450,000
Del Mundo, Capital (OE) 450,000
To record initial investment of owner.

Rent Paid in Advance

Oct. 1 Rented office space and paid three months’ rent in advance, Php 21,000.
Note: Given the length of time, i.e., more than a month, that this contract is in
effect, the matching principle requires that the contract’s cost initially be
recorded as an asset since it provides a future benefit.
Analysis Increase and decrease in assets
Rules Increases in assets are recorded by debits.
Decreases in assets are recorded by credits.

Entry Increase in assets is recorded by a debit to prepaid rent.

Decrease in assets is recorded by a credit to cash.

Journal Entry:

Oct Dr. Cr.

1 Prepaid Rent (A) 21,000
Cash (A) 21,000
To record rent paid in advance.

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 LICEO DE LA SALLE SENIOR HIGH SCHOOL
FIRST SEMESTER | QUARTER 1
AY 2020 – 2021 | FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS, AND MANAGEMENT 1

Vehicle Acquired by Issuing a Note

Oct. 2 Del Mundo purchases a Php 300,000 used truck by paying Php 200,000 in cash
and signing a Php 100,000 note payable which is due in 18 months.

Analysis Increase in assets. Decrease in assets. Increase in liabilities

Rules Increases in assets are recorded by debits.
Decreases in assets are recorded by credits.
Increase in liabilities are recorded by credits.
Entry Increase in assets is recorded by a debit to vehicles.
Decrease in assets is recorded by a credit to cash.
Increase in liabilities are recorded by a credit to notes payable.

You have 2 options in recording this entry. You may record the transactions separately:

Oct Dr. Cr.

2 Vehicles (A) 200,000
Cash (A) 200,000
To record purchased truck in cash.

Vehicles (A) 100,000

Notes Payable (L) 100,000
To record purchased truck by issuing a notes
payable.

However, this may look redundant and the format occupies a lot of space in your journal. Hence,
we can combine both entries, forming a compound entry, as shown below. With this, your
presentation becomes more simplified. The creation of compound entries are preferred.

Journal Entry (Compound Entry):

Oct Dr. Cr.

2 Vehicles (A) 300,000
Cash (A) 200,000
Notes Payable (L) 100,000
To record purchased truck and the issuance of notes
payable.

Equipment Acquired for Cash

Oct. 3 Del Mundo purchases mechanical lawn mowers for Php 54,000 in cash.

Analysis Increase and decrease in assets.

Rules Increases in assets are recorded by debits.
Decreases in assets are recorded by credits.

Entry Increase in assets is recorded by a debit to equipment.

Decrease in assets is recorded by a credit to cash.

Journal Entry:

Oct Dr. Cr.

3 Equipment (A) 54,000
Cash (A) 54,000
To record purchase of equipment in cash.

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 LICEO DE LA SALLE SENIOR HIGH SCHOOL
FIRST SEMESTER | QUARTER 1
AY 2020 – 2021 | FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS, AND MANAGEMENT 1

Expenses Incurred and Paid

Oct. 4 Del Mundo purchases Php 1,500 worth of gasoline.

Analysis Decrease in assets. Decrease in owner’s equity.

Rules Decrease in assets are recorded by credits.
Decreases in owner’s equity are recorded by debits.
Entry Decrease in owner’s equity is recorded as debit to gas expense.
Decrease in assets is recorded by a credit to cash.

Journal Entry:

Oct Dr. Cr.

4 Gas Expense (E) 1,500
Cash (A) 1,500
To record payment of gas expense.

Insurance Premiums Paid

Oct. 5 Del Mundo pays Php 24,000 for a one year insurance contract that protects his
business from October 1 until September 30 of the following year.

Analysis Increase and decrease in assets

Rules Increases in assets are recorded by debits.
Decreases in assets are recorded by credits.
Entry Increase in assets is recorded by a debit to prepaid insurance.
Decrease in assets is recorded by a credit to cash.

Journal Entry:

Oct Dr. Cr.

5 Prepaid Insurance (A) 24,000
Cash (A) 24,000
To record insurance paid in advance.

Supplies Purchased on Account

Oct. 8 Del Mundo purchases Php 1,000 worth of office supplies, placing the purchase
on his account with the store rather than paying cash.
Note: Supplies are a prepaid expense (an asset) until they are used and thereby
become a cost of doing business (expense). Accounts payable differ from notes
payable. Accounts payable are amounts the entity owes based on the good credit
of the entity of the owner, whereas notes payable are amounts the entity owes
under formal obligations.
Analysis Increase in assets. Increase in liabilities.
Rules Increases in assets are recorded by debits.
Increase in liabilities are recorded by credits.
Entry Increase in assets is recorded by a debit to supplies.
Increase in liabilities is recorded by a credit to accounts payable.

Journal Entry:

Oct Dr. Cr.

8 Supplies (A) 1,000
Accounts Payable (L) 1,000
To record supplies paid on account.

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 LICEO DE LA SALLE SENIOR HIGH SCHOOL
FIRST SEMESTER | QUARTER 1
AY 2020 – 2021 | FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS, AND MANAGEMENT 1

Revenues Earned and Cash Collected

Oct. 14 The Del Mundo Landscape Specialist cuts grass for 7 customers, receiving Php
2,500 from each.

Analysis Increase in assets. Increase in owner’s equity.

Rules Increases in assets are recorded by debits.
Increase in owner’s equity are recorded by credits.
Entry Increase in assets is recorded by a debit to cash.
Increase in owner’s equity is recorded by a credit to lawn cutting revenues.

Journal Entry:

Oct Dr. Cr.

14 Cash (A) 17,500
Lawn Cutting Revenues (A) 17,500
To record revenue earned through the performance
of lawn cutting services.
* 7 customers @ Php 2,500 each = Php 17,500

Unearned Revenues Collected

Oct. 20 Del Mundo receives Php 13,500 from a customer for six future maintenance
visits.
Note: An advance deposit for a customer is an obligation to perform work in the
future. It is a liability until the work is performed, at which time it becomes
revenue. Therefore, the advance deposit is called unearned revenues.
Analysis Increase in assets. Increase in liabilities.
Rules Increases in assets are recorded by debits.
Increases in liabilities are recorded by credits.
Entry Increase in assets is recorded by a debit to cash.
Increase in liabilities is recorded by a credit to unearned revenues.

Journal Entry:

Oct Dr. Cr.

20 Cash (A) 13,500
Unearned Revenues (L) 13,500
To record cash received from unearned revenues.

Revenues Earned on Account

Oct. 22 Del Mundo Landscape Specialist cuts grass for 8 customers, billing each one Php
2,500 but receiving no cash.
Note: In accordance with the revenue recognition principle, revenue is
recognized upon the completion of a service or the delivery of a product, even if
cash was not received at that time.
Analysis Increase in assets.
Increase in owner’s equity
Rules Increases in assets are recorded by debits.
Increases in owner’s equity are recorded by credits.
Entry Increase in assets is recorded by a debit to accounts receivable.
Increase in owner’s equity is recorded by a credit to lawn cutting revenues.

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 LICEO DE LA SALLE SENIOR HIGH SCHOOL
FIRST SEMESTER | QUARTER 1
AY 2020 – 2021 | FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS, AND MANAGEMENT 1

Journal Entry:

Oct Dr. Cr.

22 Accounts Receivable (A) 20,000
Lawn Cutting Revenues (I) 20,000
To record service revenue on account.
* 8 customers @ Php 2,500 each = Php 20,000

Salaries Paid

Oct. 26 Del Mundo pays Php 4,000 in salaries to part time employees.

Analysis Decrease in assets and owners equity.

Rules Decrease in assets are recorded by credits.
Decreases in owner’s equity are recorded by debits.
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:

Oct Dr. Cr.

26 Salaries Expense (E) 4,000
Cash (A) 4,000
To record salaries paid for the period.

Advertising Paid

Oct. 28 Del Mundo pays Php 1,750 to print advertising flyers.

Analysis Decrease in assets and owner’s equity.

Rules Decrease in assets are recorded by credits.
Decreases in owner’s equity are recorded by debits.
Entry Decrease in owner’s equity is recorded by a debit to advertising expense.
Decrease in assets is recorded by a credit to cash.

Journal Entry:

Oct Dr. Cr.

28 Advertising Expense (E) 1,750
Cash (A) 1,750
To record advertising paid for the period.

Withdrawal of Cash by Owner

Oct. 29 Del Mundo withdraws Php 5,000 for personal use.

Analysis Decrease in assets. Decrease in owner’s equity.

Rules Decrease in assets are recorded by credits.
Decreases in owner’s equity are recorded by debits.
Entry Decrease in owner’s equity is recorded by a debit to Del Mundo, Withdrawals
Decrease in assets is recorded by a credit to cash.

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 LICEO DE LA SALLE SENIOR HIGH SCHOOL
FIRST SEMESTER | QUARTER 1
AY 2020 – 2021 | FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS, AND MANAGEMENT 1

Journal Entry:

Oct Dr. Cr.

29 Del Mundo, Withdrawals (OE) 5,000
Cash (A) 5,000
To record owner’s cash withdrawal.

Accounts Receivable Partially Collected

Oct. 30 Five out of eight customers billed last October 22 each pay Php 2,500.

Analysis Increase and decrease in assets.

Rules Increase in assets are recorded by debits.
Decrease in assets are recorded by credits.
Entry Increase in assets is recorded by debit to cash.
Decrease in assets is recorded by a credit to accounts receivable.

Journal Entry:

Oct Dr. Cr.

30 Cash (A) 12,500
Accounts Receivable (A) 12,500
To record collection of partial payment from billed
customers.
* 5 customers @ Php 2,500 each = Php 12,500

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 LICEO DE LA SALLE SENIOR HIGH SCHOOL
FIRST SEMESTER | QUARTER 1
AY 2020 – 2021 | FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS, AND MANAGEMENT 1

Let’s Practice!

Geraldine Garcia is an experienced events planner. The transactions and accounts of her small
business for the year 2019 are as follows:

July
1 Invested ₱100,000 in cash to start her business.
1 Paid ₱10,000 in advance for two months’ rent.
3 Bought office furniture for ₱15,000 in cash.
3 Received delivery of laptop computer, ₱54,000. Paid 50% down and balance due
in 30 days.
5 Performed events services for ₱12,000 in cash.
5 Acquired a fax machine for ₱7,500; paid ₱3,000 in cash, balance due in 10 days.
5 Performed events services for ₱10,800 on credit and issued a billing statement.
7 Received ₱5,400 from the billed client.
14 Paid ₱10,000 for salaries.
14 Settled in full the ₱4,500 balance for the fax machine.
14 Received ₱7,000 in cash for services performed.
20 Performed events services for ₱12,000 on credit.
23 Paid ₱1,350 for the monthly telephone bill.
23 Paid ₱2,400 for the electric and water bills.
27 Collected ₱2,000 from billed clients.
29 Geraldine withdrew ₱7,000 in cash for personal expenses.

Required: Journalize using the following accounts: Cash; Accounts Receivable; Prepaid Rent;
Office Furniture; Office Equipment; Accounts Payable; Garcia, Capital; Garcia, Withdrawals;
Consulting Revenues; Salaries Expense; and Utilities Expense. You may check your entries
using the answer key on the next page.

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 LICEO DE LA SALLE SENIOR HIGH SCHOOL
FIRST SEMESTER | QUARTER 1
AY 2020 – 2021 | FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS, AND MANAGEMENT 1

Answer Key:

Date Account Title / Explanation PR Debit Credit

2019
July Dr. Cr.
1 Cash 100,000
Garcia, Capital 100,000
To record initial investment.

1 Prepaid Rent 10,000

Cash 10,000
To record advance payment of rent.

3 Office Furniture 15,000

Cash 15,000
To record the purchase of office furniture.

3 Office Equipment 54,000

Cash 27,000
Accounts Payable 27,000
To record purchase of office equipment.

5 Cash 12,000
Consulting Revenues 12,000
To record the revenue from the service rendered.

5 Office Equipment 7,500

Cash 3,000
Accounts Payable 4,500
To record the purchase of office equipment.

5 Accounts Receivable 10,800

Consulting Revenues 10,800
To record the revenue from the service rendered.

7 Cash 5,400
Accounts Receivable 5,400
To record the collection of payment from billed
client.

14 Salaries Expense 10,000

Cash 10,000
To record payment of salaries.

14 Accounts Payable 4,500

Cash 4,500
To record the payment of the remaining balance of
the fax machine.

14 Cash 7,000
Consulting Revenues 7,000
To record the revenue from the service rendered

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 LICEO DE LA SALLE SENIOR HIGH SCHOOL
FIRST SEMESTER | QUARTER 1
AY 2020 – 2021 | FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS, AND MANAGEMENT 1

Date Account Title / Explanation PR Debit Credit

2019
July
20 Accounts Receivable 12,000
Consulting Revenues 12,000
To record the revenue from the service rendered
on account.

23 Utilities Expense 1,350

Cash 1,350
To record payment for telephone bill.

23 Utilities Expense 2,400

Cash 2,400
To record payment for electric and water bills.

27 Cash 2,000
Accounts Receivable 2,000
To record the collection of payment from billed
client.

29 Garcia, Withdrawals 7,000

Cash 7,000
To record cash withdrawal by the owner.