Transactions in a Service Business

Accounting I

(Activity 01- Servicing transactions)

Given: Jordan River Laundry Service that started September 2,2019 has the
following investments:
Cash P 120,000; laundry equipment P35,000; furniture & fixtures P22,500; office
supplies P 4,200;
laundry supplies P5000.

(Let us revisit the 10-step accounting cycle using the transactions of Jordan River
Laundry, a sole proprietorship service business, which started on September 2,
2015. The initial investments of Mr. Jordan were:

During the month of September, the following additional transactions occurred:

Sept 8

Bought dryers and spinners from Mirzi Outlet for P40,000. Jordan paid 30%
down payment and the balance on account.

Sept 10

Laundry services rendered totaled P 195,000, of which 40% on account.

Sept 12

Received proceeds of P220,000 from a bank loan for business use. Jordan would
use this to purchase a van for pick-up and delivery of laundry from and to clients.

Sept 14

Purchased a delivery van from Renzo Motors for P250,000. Jordan used the
entire proceeds from the bank loan to pay for the delivery van and the balance
on account.

Sept 15

Paid various operating expenses during the month: Water and electricity,
P28,000; Telephone expense, P6,000; and Repairs expense, P 3,500.
 

Sept 18

Laundry services rendered totaled P 180,000, of which 30% was settled with a
note and the balance on account.

Sept 20

Received laundry advances from Madeleine Hotel for services to be rendered

next month, P 90,000.

Sept 22

Collected 90% of the outstanding receivable from September 10 transaction.

Sept 26

Purchased detergents and fabric conditioners from Ivana Cleaning Scents,

P12,000. Paid P8,000 cash and the balance on account.

Sep 28

Returned P 2,000 worth of damaged detergents and fabric conditioners bought

last September 26.

Sept 29

Mr. Jordan withdrew P 3,000 for personal use.

Sept 30

Paid wages of two staff, P10,000 each.

Jordan River Laundry uses the following chart of accounts:

 

Laundry Equipment Furniture and

Cash Laundry Supplies
Fixtures

Allowance for
Office Supplies Prepaid Rent Doubtful Accounts Accounts Payable

Accounts
Loan Payable Delivery Vehicle Wages Expense Receivable

Laundry Services Advances from

Notes Payable Utilities Expense
Revenue Clients

Repairs Expense Utilities Payable Notes Receivable Jordan, Drawing

Interest Receivable Jordan, Capital Interest Income Interest Expense

Accumulated Accumulated Accumulated

Depreciation Depreciation – Depreciation – Depreciation –
Expense Furniture and Delivery Vehicle Laundry Equipment
Fixtures

Laundry Supplies Office Supplies Doubtful Accounts

Interest Payable Expense Expense Expense