Analysis of Transactions

FUNDAMENTALS OF ACCOUNTING ARNEL N.
MORAN
THE ANALYSIS OF TRANSACTION
Following are the steps involved in analyzing 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 Anime World Gallery for the month of May. They will be recorded using
the double-entry system. To analyze each transaction, the following accounts shall be used to record the
transactions:
Anime World Gallery

Chart of Accounts
Assets
110 Cash
120 Accounts Receivable
130 Art Supplies
140 Prepaid Rent
150 Prepaid Insurance
160 Office Equipment
170 Furniture and Fixture
Liabilities
210 Accounts Payable
220 Notes Payable
230 Salaries Payable
240 Utilities Payable
250 Interest Payable
260 Unearned Painting Revenue
Owner’s Equity
310 Ong, Capital
320 Ong, Drawing
Income
410 Painting Revenue
Expenses
510 Salaries Expense
520 Art Supplies Expense
530 Rent Expense
540 Insurance Expense
550 Utilities Expense
Page 1 of 7
FUNDAMENTALS OF ACCOUNTING ARNEL N. MORAN
Initial Investment
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:
Rules:
Entry:
Dr Cr
Issuance of Note for Cash
May 3 Gisel Ong issued a promissory note for a P100,000 loan from Metrobank. The note
carries a 12% interest per annum. The interest and the principal are payable after one
year.
Analysis:
Rules:
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:
Dr Cr
Page 2 of 7
Acquisition of Furniture Paying Down Payment and the Balance on Account
May 5 Ms. Ong acquired furniture from Alson’s Trading 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:
Dr Cr
Advance Payment of Rental
May 6 Gisel Ong rented office space and paid two month rent in advance, all costing
P18,000.
Analysis:
Rules:
Entry:
Dr Cr
Payment of Insurance Premiums
May 7 Ms. Ong paid Asia Insurance Co. P10,800 for one year insurance of the gallery.
Analysis:
Rules:
Entry:
Dr Cr
Events not Affecting the Accounting Equation
May 7 Hired part-time student helper with P4,000 monthly salary. The student helper started
working on the following day.
Page 3 of 7
Analysis:
Rules:
Entry:
Dr Cr
May 8 Called National Bookstore and ordered art supplies worth P7,200 .
Analysis:
Rules:
Entry:
Dr Cr
Purchases of Art Supplies on Account
May 8 The P7,200 worth of art supplies ordered from National Bookstore were delivered on
account.
Analysis:
Rules:
Entry:
Dr Cr
Income Earned on Account
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 paintings delivered.
Analysis:
Rules:
Entry:
Dr Cr
Page 4 of 7
Partial Settlement of Accounts Payable
May 12 Ms. Ong paid National Bookstore P3,000 of the amount owed.
Analysis:
Rules:
Entry:
Dr Cr
Partial Collection of Accounts Receivable
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:
Dr Cr
Cash Withdrawal by Owner for Personal use
May 18 Gisel Ong withdrew P18,000 for personal use.
Analysis:
Rules:
Entry:
Dr Cr
Collection of Unearned Income
May 20 Ms. Ong received P80,000 cash for a contract to paint Lelouch.
Page 5 of 7
Analysis:
Rules:
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:
Dr Cr
Payment of Salaries
May 25 Ms. Ong paid helper’s salary for the month, P4,000.
Analysis:
Rules:
Entry:
Dr Cr
Payment of Expenses Incurred/Consumed
May 29 Gisel Ong paid water bill of P540 for the month.
Analysis:
Rules:
Entry:
Dr Cr
Page 6 of 7
Unpaid Expenses already Consumed/Incurred (Accrued Expenses)
May 30 Ms. Ong received bill from Meralco amounting to P4,500.
Analysis:
Rules:
Entry:
Dr Cr
Page 7 of 7

Analysis of Transactions

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Analysis of Transactions

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FUNDAMENTALS OF ACCOUNTING ARNEL N.

THE ANALYSIS OF TRANSACTION

Following are the steps involved in analyzing transactions:

Anime World Gallery

Issuance of Note for Cash

Acquisition of Office Equipment for Cash

Acquisition of Furniture Paying Down Payment and the Balance on Account

Advance Payment of Rental

Payment of Insurance Premiums

Events not Affecting the Accounting Equation

Purchases of Art Supplies on Account

Income Earned on Account

Partial Settlement of Accounts Payable

Partial Collection of Accounts Receivable

Cash Withdrawal by Owner for Personal use

May 18 Gisel Ong withdrew P18,000 for personal use.

Collection of Unearned Income

Cash Collection from Income Earned

Payment of Expenses Incurred/Consumed

Unpaid Expenses already Consumed/Incurred (Accrued Expenses)

May 30 Ms. Ong received bill from Meralco amounting to P4,500.

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