Double Entry Bookeeping

Transaction

1 XYZ Wellness Center was a sole proprietorship -service business esblablished by Ms. Mary with an initial c

This transaction gives rise to an increase in our asset (cash) and also another increase in the capital account
an increase in asset means debit and an increase in capital means credit.

The journal entry should be written as follows:

cash 200,000.00
mary, Capital 200,000.00

to record owner's capital.

2 A rental agreement for the wellness center location for 1 year was signed and paid for P 120,000.00

You will note that the rental paid is for 1 year which means that it is an advance payment. As such, the paym
asset(Prepaid Rent) and the amount use to pay is cashwhich is also another asset : As such, we have an incr
and a decrease in asset which is credit.

The journal entry should be written as follows:

Prepaid Rent 120,000.00
Cash 120,000.00

3 Ms. Mary bought chairs for P 50,000, Mirrors for P 30,000 a cash register for P 10,000 all on credit

The acquisition of the furniture (chairs) and equipment (mirror and cash register) brings an increase to our a
company owned). However, it is made on credit (not paid by cash) which gives rise to an increase in liability:
asset means debit and an increase in liability means credit.

The journal entry should be written as follows:

Furnitures 50,000.00
Equipment (mirrors) 30,000.00
Equipment (cash register) 10,000.00
A/P 90,000.00

to record acquisition of furnitures and equipment on account

4 Supplies was purchased on credit worth P 150,000

 Buying Supplies which is an asset but this was made on credit giving rise to a liability. The transaction resulte
(supplies) and an increase in liability. Once again, : an increase in asset means debit and an liability means c

The journal entry should be written as follows:

Supplies 150,000.00
Accounts Payable (A/P) 150,000.00

to record purchase og supplies on account

5 Linen Supplies amounting to P20,000 was bought on cash

Buying linen supplies is an increase in asset and paying it by cash means a decrease in asset.The transaction
asset which is a debit and a decrease in another asset which is credit.

The journal entry should be written as follows:

Linen Supplies 20,000.00
Cash 20,000.00

to record purchase of linen supplies.

6 Service Income made during the first month amount to P 75,000 on cash and P55,000 on credit.

This transaction affects revenue and the asset accounts. A service income is a revenue account, however, sin
by cash(asset) and another portion is a credit (meaning we have recievable or the customer owes to the bus
transaction resulted to an increase in asset - both cash and accounts recievables (debit) an increase in reve

The journal entry should be written as follows:

Cash 75,000.00
Accounts Recievable 55,000.00
Service Income 130,000.00

to record cash and credit service income for the first month.

7 wellness Supplies used amounts to P 95,000

The transaction affects the supplies and will result to an increase in wellness supplies expense and decrease
the transaction is an increase in expense (debit) and decrease in asset (credit)

The journal entry should be written as follows:

Supply expense 95,000.00
Wellness supply 95,000.00
8 Electric and Water invoice of P12,000 was received but not paid
The transaction affects the expense account (electric and water expense) and a liability account since the ex
not paid (accrued expense). The result is an , : is an increase in expense (debit) and increase in liability (cre

The journal entry should be written as follows:

Electric and Water Expense 12,000.00
Accrued Electric and water expense 12,000.00

to record reciept of electric and water invoice.

9 Telephone bills of P1,750 was paid

The transaction affects the expense account but this time also affects the asset accounts since it was paid. :
expense - telephone bill (debit) and a decrease in asset -cash (credit)

The journal entry should be written as follows:

Telephone Expense 1,750.00
Cash 1,750.00

to record payment of telephone bills.

10 Salaries paid to helpers amounted to P 9,950.

The transaction affects the expense account and also affects asset accounts since it was paid , : The result i
salaries (debit) and decrease in asset-cash (credit)

The journal entry should be written as follows:

Salaries Expense 9,950.00
Cash 9,950.00

to record payment of salaries.

Ms. Mary paid P50,000 on the credit made for the purchase of chairs/mirrors and cash register and anothe
11
wellness supplies.

The transaction affects the asset account and also affects liability since the amount we owe to creditor was p
deccrease in liability - accounts payable (debit) and decrease in asset-cash (credit)

The journal entry should be written as follows:

Accounts Payable 80,000.00
Cash 80,000.00

to record payment to supplier.

12 An emergency arises and Ms. Mary took P15,000 from the the business without any intention of returning
The transaction affects the capital account and also affects asset accounts since the owner made a permane
from the business , this permanent withrawal is called "drawing", : The result is a deccrease in capital - dra
in asset-cash (credit)

The journal entry should be written as follows:

Ms. Mary Drawing 15,000.00
Cash 15,000.00

to record owner withrawal.

ed by Ms. Mary with an initial capital of P200,000.00

increase in the capital account (investment by Ms. Leira)

and paid for P 120,000.00

nce payment. As such, the payments is treated to be an

asset : As such, we have an increase in asset which is debit

or P 10,000 all on credit

ster) brings an increase to our assets(properties the

es rise to an increase in liability: As such, an increase in
 liability. The transaction resulted to an increase in asset
ns debit and an liability means credit.

ecrease in asset.The transaction resulted to, : an increase in

nd P55,000 on credit.

a revenue account, however, since a portion of sale is paid

or the customer owes to the business money) , : Thus the
ables (debit) an increase in revenue or sales (credit)

supplies expense and decrease in wellness supplies, : Thus

dit)

hire
d a liability account since the expenses are incurred but
bit) and increase in liability (credit)

set accounts since it was paid. : The result is an increase in

since it was paid , : The result is an increase in expense -

ors and cash register and another P30,000 payment on the

mount we owe to creditor was paid., : The result is a

(credit)
hout any intention of returning the money back
nce the owner made a permanent withrawal of money
ult is a deccrease in capital - drawing(debit) and decrease
Cash
Sub Ledger

Account Name MARY CAPITAL

Year Transaction Details Debit Credit Balance
Month /Day
1 Owner Investment 200,000.00 200,000.00

Account Name PREPAID RENT

Year Transaction Details Debit Credit Balance
Month /Day
2 Advance rental payment 120,000.00 120,000.00

Account Name FURNITURES

Year Transaction Details Debit Credit Balance
Month /Day
3 Purchase Chairs 50,000.00 50,000.00

Account Name ACCOUNTS PAYABLE

Year Transaction Details Debit Credit Balance
Month /Day
3 Purchase Chairs 50,000.00 50,000.00
3 Purchase Mirrors 30,000.00 80,000.00
3 Purchase Cash Register 10,000.00 90,000.00
4 Purchase Supplies 150,000.00 240,000.00
11 Payments 80,000.00 160,000.00

Account Name EQUIPMENT

Year Transaction Details Debit Credit Balance
Month /Day
3 Purchase Mirrors 30,000.00 30,000.00
3 Purchase Cash Register 10,000.00 40,000.00

Account Name WELLNESS SUPPLIES

Year Transaction Details Debit Credit Balance
Month /Day
4 Purchase Supplies 150,000.00
7 Used Supplies (expense) 95,000.00 55,000.00

Account Name LINEN SUPPLIES

Year Transaction Details Debit Credit Balance
Month /Day
5 Bought Linen Supplies 20,000.00 20,000.00

Account Name SERVICE INCOME

Year Transaction Details Debit Credit Balance
Month /Day
 6 Service Income 130,000.00 130,000.00

Account Name ACCOUNT RECIEVABLE

Year Transaction Details Debit Credit Balance
Month /Day
6 Service Income 55,000.00 55,000.00

Account Name ELECTRIC AND WATER EXPENSE

Year Transaction Details Debit Credit Balance
Month /Day
8 Invoice received 12,000.00 12,000.00

Account Name ACCRUED EXPENSE

Year Transaction Details Debit Credit Balance
Month /Day
8 Electric and water Invoice 12,000.00 12,000.00

Account Name TELEPHONE EXPENSE

Year Transaction Details Debit Credit Balance
Month /Day
9 Invoice received 1,750.00 1,750.00

Account Name SALARY EXPENSE

Year Transaction Details Debit Credit Balance
Month /Day
10 Helpers 9,950.00 9,950.00

Account Name MARY, DRAWING

Year Transaction Details Debit Credit Balance
Month /Day
12 Cash Withrawal 15,000.00 15,000.00
 Mary Wellness Center General Ledger (CASH IN/OUTFLOW)

Account Name CASH

Year Transaction Details Debit
Month /Day
1 Owner Investment 200,000.00
2 Advance rental payment
5 Bought Linen Supplies
6 Service Income 75,000.00
9 Telephone Expense
10 Helpers
11 Payments : Furnitures and Equipment
12 Cash Withrawal
Paid later ( 30, 60 90 terms)
CASH IN/OUTFLOW)

SH
Credit Balance

200,000.00
120,000.00 80,000.00
20,000.00 60,000.00
135,000.00
1,750.00 133,250.00
9,950.00 123,300.00
80,000.00 43,300.00
15,000.00 28,300.00
TRIAL BALANCE
Now let us look on the post closing trial balance of MARY WELLNESS CENTER

Mary Wellness Center

Post Closing Trial Balance
Date (end of the Month)

Debit(Dr) Credit (Cr)

Cash P 28,300.00
Accounts Recievable 55,000.00
Linen Supplies 20,000.00
Supplies 55,000.00
Prepaid Expense 110,000.00
Furniture 50,000.00
Accumulated Depreciation-Furniture
Equipment 40,000.00
Accumulated Depreciation-Equipment
Accounts Payable
Accrued Expenses
Leira, Capital

Total P 358,300.00

Capital : it is the data after profit and drawing are considered

LNESS CENTER

Credit (Cr)

200,000.00
15,000.00 Drawing
2,450.00 from the income statement
P 2,083.00
17,450.00
1,667.00
160,000.00 182,550.00
12,000.00
182,550.00

P 358,300.00
 Mary Wellness Center
Income Statement
Date (end of the Month)

Service Income P 130,000.00

Less: Expense
Supplies 95,000.00
Electric & water 12,000.00
Telephone 1,750.00
salaries 9,950.00
Rent 10,000.00
Depreciation - Furniture 2,083.00
Depreciation - Equipment 1,667.00 132,450.00
Net Profit/Loss (P 2,450.00) it’s a loss
Depreciation
Please Note that on the adjusting column, the following assumptions are made:

a. There is a one month expired portion on the prepaid expense representing the first month = P 10,000 which
is rent expense.

The Adjusting entry should be written as follows:

Rent Expense 10,000.00
Prepaid expense 10,000.00
Refer to december 2 transaction
b. The Furniture and the equipment are estimated to have a useful life of 2 years,

The Adjusting entry should be written as follows: straight line :

Dimishing
Asset cost - Salvage Value
Useful Life

Please Note we do not have a salvage value for both furniture and equipment.

a. Furniture = P 50,000/24 = P 2,083/month

b. Equipment = P 40,000/24 = P 1,667/month (Mirror and Cash Register)
Refer to december 3 transaction
ADJUSTING ENTRY
So the adjusting entries are as follows:
 A) The Adjusting entry should be written as follows:
expense inc Depreciation Expense-Furniture 2,083.00
Asset dec Accumulated Depreciation -Furniture 2,083.00

B) The Adjusting entry should be written as follows:

expense inc Depreciation Expense-Equipment 1,667.00
Asset dec Accumulated Depreciation -Equipment 1,667.00

1. Accrued revenues are revenues that have been earned by providing a good or service, but for which no cash has been received
They are recorded as receivables on the balance sheet to reflect the amount of money that customers owe the business
Accrued revenues are common for companies with long-term customers who pay in installments

2. Prepaid revenue – also called unearned revenue and unearned income – is the reverse; it's money someone pays your company in advance of you doing
you have to put prepaid expenses and revenues in their own accounting categories.

3. Depreciation

4. Prepaid Expense
mpany in advance of you doing the work
Closing Entries
Closing entries for these illustrative problem are made as follows

1. First, Service Income (revenue)account is closed by transferring the balance to the income summary account

Date Accounts Debit Credit

XX Service Income 130,000.00
Income Summary 130,000.00 from ledger / T- acounts

2. Second, the Expense account is closed by transferring the balance to the income summary account

Date Accounts Debit Credit

XX Income Summary 132,450.00 adjusted income statement fom the Worksheet, balancing to zero
XX Supplies 95,000.00
XX Electric & water 12,000.00
XX Telephone 1,750.00
XX salaries 9,950.00
XX Rent 10,000.00
XX Depreciation - Furniture 2,083.00
XX Depreciation - Equipment 1,667.00
132,450.00

The Net Balance of the income summary account is a P 2,450.00 debit ( means there is a loss)

Date Accounts Debit Credit For Net Income : income summary (debit), while capital account (cred
 XX Mary, Capital 2,450.00
Income Summary 2,450.00 from the Balance sheet retained earnings, the difference between the first entry

Please note that if it is a profit (income is more than the Expense), then the closing entry should be a debit
to income summaryand Credit to Capital.

3. Finally, Let us close the P 15,000 withrawn by the owner

Date Accounts Debit Credit

X/30 Mary, Capital 15,000.00
Mary, Drawing 15,000.00 From the T accounts
ncing to zero

while capital account (credit)

nce between the first entry and the second entry
 Mary Wellness Center
Statement of Financial Position
Date (end of the Month)

ASSETS
Current Assets
Cash
Accounts Recievables
Linen Supplies
Supplies
Prepaid Expenses
Total Current Assets

NON CURRENT ASSETS

Furniture
Accumulated Depreciation -Furniture (2,083)
Equipment
Accumulated Depreciation -Equipment (1,667)
Total Non - Current Assets
Total Assets

LIABILITIES
Accounts Payable
Accrued Expense
Total Liabilities

OWNERS EQUITY
Mary, Capital
Total Liabilities and Owners Equity

Please note that the Capital is shown as P 182,550 computed as follows

Mary Capital, Beginning P 200,000

Less : Mary Drawing '(15,000)
Net Loss '(2,450)
Mary Capital, Ending P 182,550
 ter
Position
nth)

P28,300
55,000
20,000
55,000
110,000
P268,300

TS
50,000
47,917
40,000
38,333
P 86,250 185000
P354,550 2450
182550

P 160,000
12,000
172,000

182,550
354,550
 Mary Wellness Center
Worksheet
Date (end of the Month)
Ledger monthly
10 column worksheet , Mary wellne
Unadjusted Trial Balance Adjustments
Account Title Debit Credit Debit Credit
Cash 28,300
Account Recievable 55,000
Linen Supplies 20,000
A Supplies 55,000
Prepaid Expenses 120,000 10,000
Furniture 50,000
Equipment 40,000
Accounts Payable 160,000
L
Accrued Expense 12,000
Mary, capital 200,000
OE
Mary, Drawing 15,000
revenue Service Income 130,000
Supply Expense 95,000
Electric & Water Expense 12,000
E
Telephone Expense 1,750
Salary Expense 9,950
Total 502,000 502,000
Adjustments
Rent Expense 10,000
Expense

Dedpreciation Exp: Furn 2,083

Dedpreciation Exp: Equip 1,667
Accumulated Depreciation-
2,083
Furniture
Asset

Accumulated Depreciation -
1,667
Equipment

13,750 13,750
Net Loss
Totals
ellness Center
orksheet
of the Month)
A= L+OE R-E
olumn worksheet , Mary wellness center
Adj Trial Balance Balance Sheet Income Statement
Debit Credit Debit Credit Debit Credit
28,300 28,300 single entry & double entry
55,000 55,000
20,000 20,000
55,000 55,000 GAAP :
110,000 110,000 taxation
50,000 50,000 User
40,000 40,000 Governmet for tax
160,000 160,000 Partner : Dividends/share of profit
12,000 12,000 exploration and familariazation
200,000 200,000
15,000 15,000
130,000 130,000 75000 Payment received
95,000 95,000 55000 A/R
12,000 12,000 130000 agreed terms and conditi
1,750 1,750
9,950 9,950 OR with the buyers conse
30,60, 90
ustments legals issue
10,000 10,000
2,083 2,083
1,667 1,667

2,083 2,083 for accum : asset value decrease, its credit.

1,667 1,667

505,750 505,750 373,300 375,750 132,450 130,000

2,450 2,450 Loss
375,750 375,750 132,450 132,450 by the adjustment the financial condition, bec

Equipments : ROI return of Investment

ouble entry

share of profit

agreed terms and condition

OR with the buyers consent

legals issue

se, its credit.

he financial condition, becomes normal.

urn of Investment
 Mary Wellness Center
Post Trial Balance
As of (mo, day, year)

Accounts Debit Credit

Cash ₱28,300.00
Account Recievable 55,000.00
Linen Supplies 20,000.00
Asset

Supplies 55,000.00
Prepaid Expenses 110,000.00
Furniture 50,000.00
Equipment 40,000.00

Accumulated Depreciation-Furniture ₱2,083.00

Adjustment
Accumulated Depreciation -Equipment 1,667.00

Accounts Payable 160,000.00

Lia
Accrued Expense 12,000.00
OE Mary capital 182,550.00 Investment - drawings + Net income

₱358,300.00 ₱358,300.00