• BUSINESS MATH

• REPRESENTATIVES:
1. Semenilla, Jesrael S.
2. Ventura, Clarys Faith
3. Alabado, Merrilyn
4. Geoligao, Roxan
5. Humilde, Rhyne Mark
BUSINESS MATH
 Competencies to be tested

• Principles of mathematics in marketing, accounting and

finance.
• Types of financial statements for business transaction
• Assets and liabilities.
• Word problems in business math.
 Principles of Mathematics and their
Application to Business
Fundamental of Operations
 Addition, Subtraction, Multiplication & Division
 Formulas involving Addition and Subtraction
Cash Budget
Formulas: Beginning Balance + Estimated Cash Receipts = Total Cash
Available
Total Cash Available- Estimated Cash Payments = Ending Balance
Cash Book
Formulas: Beginning Balance + Cash Receipts = Total Cash
Available
Total Cash Available – Cash Payments = Ending Balance

Cash Register
Formulas: Original Amount + Cash Receipts = Total Cash
Total Cash – Cash Payouts = Balance
Bank Accounts
a. Saving Account
Formula: Previous Balance + Deposits = Total Amount
Total Amount – Withdrawals = New Balance
b. Current Account
Formulas: Previous Balance – Checks Issued = New Balance
New Balance + Deposits = Total Amount
Inventory Problems
Formulas: Beginning Inventory + Purchases = Available Goods for
Sale
Available Goods for Sale – Ending Inventory = Costs of Goods Sold
Profits
Formulas: Sales – Cost of Goods Sold = Gross Profit
Gross Profit – Operating Expenses = Net Profit
Selling Price; Sales
Formulas: Cost of Goods + Desired Profit = Selling Price
Gross Sales – Returns = Net Sales
Salaries and wages
a. Private sector
8 hrs.- No. of regular working hrs.
6 days- No. of regular working days a week.
48 hrs.- No. of regular working hrs. a week.
Formulas:
Overtime Rate = Regular Rate X 1.5 (time and a half)
Regular Wage = Regular Rate X Regular Hrs.
Overtime Wage = Overtime Rate X Overtime Hrs.
Total Wages = Regular Wage + Overtime wage
b. Government Sector
8 hrs.- No. of regular working hrs. a day.
5 days- No. of regular working days a week.
40 hrs.- No. of regular working hrs. a week.
Formulas:
Monthly Salary = Annual Salary
12
Daily Salary = Monthly Salary
No. of Working days
Overtime Rate = Daily Salary
8
c. Piece Rate Wages
Earnings = No. of Pieces X Rate per piece
Finding Total Price
Total Price = Quantity X Unit Price
Averages
a. Simple Average
b. Weight Average
Finding Unit Price
Unit Price = Total Price
Quantity
Wholesale buying: Buying goods by large quantities.
 Illustrative Examples
1. For the week of January 7 to 11, the cash balance of the Mr. Garcia
showed as January 7 balance of 3,010.65. Cash receipts were estimated at
2,400.00 and cash payments at 1,800. What was the estimated cash balance
for the end of the week?
Solution:
5,410.65 –Beginning Balance
3,010 + 2, 400.00 - Estimated Cash Receipts
= 5,410.00 -Total Cash Available
5,410 - 1,800.00 - Estimated Cash Payments
= 3,610.65 - Ending Balance
Rosemarie works on 48-hr. week basis at the rate of 75.3 an hr.
with time and half for overtime. Last week, she worked 62 hrs.
Find her total earnings.

Solution:
75.3 X 1.5 = Overtime Rate 14 X 75.3 = Overtime Wage
112.95 1, 054.2
48 X 75.3 = Regular Wage 3,614.4 + 1,054.2 = Total Earnings
3,614.4 4,668.6
62 hrs. – 48 hrs. =No. of hrs.
(Overtime)
14 Hrs.
Marina bought 6 meters lace at 12.25; 3 meters at P9.00 and
7 meters at P7.50. What was the average price per meter
paid by Marina?
Solution:
6 X 12.25 = 73.5
3 X 9.00 = 27.00
7 X 7.50 = 52.50
153.00
Average = 153.00
16
= 9.56
 Fractions
Conversions Involving Fractions
1. Changing Improper Fractions to Mixed Numbers
Rule: Divide the numerator by the denominator and write the remainder as
a fraction.
Ex. 29/4 = 7 ¼
42/5 = 8 2/5
2. Changing Mixed Numbers to Improper Fractions
Rule: Multiply the denominator by the whole number and add the product
to the numerator. Write the sum over the same denominator.
Ex. 7 2/5 = 37/5
19 4/3 = 61/3
3. Reducing Fractions to Lowest Terms
Rule: Divide the numerator and denominator of the given fraction by
their greatest common factor (GCF).
Ex. 21/39 = 7/13; 220/365 = 44/73
GCF = 3 GCF = 5
4. Raising Fractions to Higher terms
Rule: Multiply the numerator and denominator of the given fraction by
the same number.
Ex. Raise 3/8 to the 24ths; 5/9 = N/54
3/8 = 9/24 5/9 = 30/54
 Illustrative Example
Dora had 120 wallets in her store. She sold 2/3 of them
at P12 each. How much did she receive?
Solution:
2 X 120 = 2 X 120
3 3
= 80 (She sold 80 wallets)
80 X 12 = 960 (She receives P960)
 Percentage of Terms
1. Percent is an expression indicating the number of parts taken from a
hundred.
2. For ex.: 14/100 or .14 maybe written as 14%.
3. Ration is a relationship between two numbers or like quantities. It may be
expressed in the form of a fraction. The ratio 36:27 of the number of girls to
that of boys (read as 36 is to 27), may be written as 4:3 or in the simplest
form 4/3.
4. Proportion is an expression of two equivalent ratios. Hence 3:4 = 9:12 is a
proportion. In the example, 3 and 12, or the 1st and 4th terms are called
extremes, while 4 & 9, which are the 2nd & 3rd terms are called means.
Therefore, If a sentence is a proportion, the product of the extremes is = to
the product of the means.
 Conversion Techniques
A. Changing Decimal to Percent
To change decimal to percent, multiply the no. by 100 which is
equivalent to moving the decimal point two places to the right and
then affix the percent sign.
Ex.
26 = 26 = 26% 225 = 225 = 22.5%
50 = 50 = 50% 8 8/3 = 866 2/3 = 866 2/3%
B. Changing Percent to Decimal
Divide the given number by 100, which is equivalent to moving the decimal
point two places to the left and then drop the percent.
Ex.
24% = .24 17.5% = .175
4& = .04 2 ½ % = .025
C. Changing Fraction to Percent
Change the fraction first to its decimal equivalent then move the decimal
point two places to the right and affix the percent sign.
Ex.
Cecille bought ¾ kg of beef for their lunch. How many % did Cecille buy?
¾ - 0.75 = 75%
 Commission
Or brokerage is the amount of money paid to an agent for buying/selling
goods.
Formulas Involving Commission Problems
1. Finding Commission
Commission = Rate of Commission x Sales
Ex.
A saleswoman sold a lot for P600,000. Her commission was 5%. How much
did she receive?
Sol. Commission = .05 x P600,000
= P30,000
2. Finding Rate Commission
Rate of Commission = Commission
Sales
Ex.
Paul receives a commission of P500 for selling a digital camera worth
P20,000. What was his rate of commission?
Sol. Rate of Commission = 500
20,000
= .25
= 2.5 %
3. Finding Sales
Sales = Commission
Rate of Commission
Ex.
Darell received P2,500 for selling a second hand BMW car which is 5%
of the purchase price of the car. At what price was the car sold?
Sol. Sales = P2,500
.05
= P50,000
 Types of Commission
1. Straight Commission- The salesman’s earning is based on his
commission alone.
Ex.
Mr. Ferrer, a sales agent, sold a 350 sq. m. lot for P1,050,000. If his
commission was 5% how much did he earn?
Solution
Commission = Rate of Commission x Sales
= .05 x P1,050,000
= P52, 500.00
2. Salary Plus Commission- Aside from commission, a
salesman has a fixed salary.
Ex.
Nora is saleslady in a department store. She receives a salary P3,000 a
month plus a commission of 1% on all sales were P35,000. How much did
she earn for the month?
Solution
Commission = .01 x P35,000
= P350
Total Earnings = P350 + P3,000
= P3,350
3. Salary Plus Bunos- A salesman is given a bunos if he exceeds his sales quota.
Example: Mariano paid on a quota bunos plan. His salary is P5,000 a month and he receives 3% commission on all
sales in excess of P10,000. Last month his sales were P18,600. How much was his total earnings?
Solution: Excess Sales = Sales Quota
= P18,600-P10,000
= P8,600
Commission = .03 x P8,600
= P258
Total Earnings = P5,000 + P258
= P5,258
4. Graduated Commission- as the sales volume increases, the rates of commission also increases.
Example: Angelica, a sales woman, is paid 6% commission on the first 10,000; 7% on the next P12,000 and 9% on all
sales over P22,000. Last month, her total sales were P26,300. Find her total commission.
Solution: 1st commission = .06 x P10,000
= P600
2nd commission = .07 x P12,000
= P840
3rd commission = .09 x P4,300
= P387
Total Commission = P1,827
5. Override Commission- commission earned fro the sales of the representatives.
Example: George a sales supervisor, has 8 representatives. He receives a commission of 15% from his own sales and
3% over-ride. During the month of December, many made sales amounting to P56,000 and his representatives
made P93,500. What were his total earnings for the month?
Solution: Personal Commission = .15% x P56,000
= P8,400
Override Commission = .03 x P93,500
= P2,805
Total Earnings = 8,400 + 2,805
= P11,205
 Gross Proceeds and Net Proceeds
- Agents and collection agents charge certain fee for rendering services to the persons for whom they are doing
the work. This fee is called commission. The entire amount of money collected is called gross proceeds. If the
commission and other expenses are deducted from the gross proceeds, the amount left is called net proceeds.
The commission is received by the agent while the net proceeds is received by the principal.
Formula: Net Proceeds = Gross Proceeds – (Commission + Expenses)
Example: 1. ) A finance administration collected P280,000.00 and charges 15% for its services. The administration
also charged P900.00 for miscellaneous expenses. Find the net proceeds.
Solutions:
Commission = .15 x 280,000.00
= P42,000.00
Net Proceeds = 280,000.00-(42,000.00 + 900.00)
= 280,000.00-42,900.00
= P237,100.00
2.) A man collected 70% of claim of P320,000.00. If his commission was 4% and spent P2,400.00 for transportation and
other expenses, how much did the principal receive?
Solutions:
Amount Collected = .70 x 320.00.00
= P224,000.00
Commission = .04 x 224,000.00
= P8, 960.00
Net Proceeds = 224, 000.00 = (8,960.00 + 2, 400.00)
= 224, 000.00 – 11, 360.00
= P 212, 640.00
 Interest is usually referred to as the sum paid for the use of one’s money. Persons in need of cash financial credit avail themselves from
banks or individuals with an agreement to pay a certain mount for the use of the borrowed amount for a given time.
 Interest is computed on an agreement rate of interest and the formula used is:
I = Prt Where I = is the interest
P = is the principal or face value
T = is the number of year’s, months or days for which the money will be
used
Ordinary and Exact Interest is the interest computed for a given number of days, divided by 360, assuming that there are
only 360 days in a year.
Exact interest computed for a given number of days, divided by 365, which is the actual or exact number of days in a year.
In computing both the ordinary and exact interest, the formula is I=PRT where the time varies depending on which one is
being calculated:
Io= Pr days (given in the problem)
360
Ie = Pr days (given in the problem)
365
Final amount is the sum of the principal and the interest as compute. It is also called maturity value.
• The formula is F= P+I
• Where P is the Principal and I is the Interest
Example: Find the interest and the final amount on P2,100.00 for 3 years at 5%?
Given: P=P2,100.00 Reg’d I = ?
R= 5% F=?
T= 3 yrs.
Rate of Interest:
To solve for the rate interest, if the principal, time and interest are given in the problem: r = I
Pt
• Example: days, what is the rate of interest charged?
Given: P=2,500.00 Reg’d: r = ?
I = P60
180
T = 360
• Finding the time:
To solve for the time if the principal, interest, and rate are given, the formula is:
T= I
Pr
Examples: The interest on a loan of P1,800.00 is P20.00. If the rate of interest is 5%, when is the loan due?
• Actual Time and Approximate Time
• Two Methods of determining with in two dates
I. Approximate number of days
II. Actual number of days
Example:
1. Solve for the actual and approximate number of days from March 18, 1994 to Nov. 30, 1994.
2. Solve for the approximate and actual number of days from April 17, 1995 to Dec. 25, 1995.
3. Find the actual and approximate number of days from Nov. 16, 1995 to june 13, 1998.
Commercial Discounts
- It is common practice to offer discounts on the price of merchandise for sale in order to attract costumers. In addition to
trade to discounts cash discounts may also be offered to encourage early payments.
Trade Discounts is large deduction given to wholesalers and manufacturers to enable them to make bigger profit.
1. A socks factory list at P90.00 per dozen. If a retailer purchases 10 dozens at a discount of 20%, how much trade discount
is he entitled to?
2. A sala set priced at P2,250.00 was offered to a retailer with a discount of P350.00. What was the rate of trade discount?
Discount Series:
In solving for the discount series, do the following steps:
1. Express all rates in decimals.
2. Subtract each of the result in step (1) from 1.
3. Multiple results in (2).
4. Subtract from 1 the product obtained from step (3). The remainder must be changed to percent.
Example:
1. .25%; 20% and 10%
2. 30%; 20% and 10%
Solution:
a. the bill was paid on Feb. 15, 12 days the invoice date.
b. Cash discount allowed in bill is 2%.
This is P800.00 x .02 = P16,000.00 = P784.00
2. An involve dates Jan. 4 in the amount of P750.00 for certain goods offers the following terms: 2/10, 1/30, n/60.
Solution:
a. If the buyer pays on jan 14 (10 days after date if invoice) he hall be entitled to a discount of 2%.
Thus:
Amount Due = P750.00 – (2% of P750.00)
= P750.00 – P15.00 = P375.00 ans.
b. If the buyer pays the seller 30 days ahead of time (within 30 days after invoice date) the amount of the invoice shall be:
amount = P75.00 – (11% of P750.00)
= P750.00 – P7.50 = P742.50
c. If payment is made within 60 days from date of invoice the full amount of P750.00 shall be due.
 Cash discounts is the deduction granted on the invoice price for early payments made by the buyer.
Terms: 3/15, n/30, or 2/15, 25/20, n/90
This mean that a cash discount of 3% may be deducted from the total amount of payment is made within 15 days after the purchase,
otherwise the full payment is payable at the end of 30 days from the date of the invoice; 2% discount if paid within 15 days from date of
purchase; 25 off is paid with 20 days, otherwise the full payment is due within 90 days from the invoice date.
Trade discount is first deducted to get the invoice price. Cash discount is computed on the invoice price.
Ex.
1. Find the amount due on the following:
Invoice_______P8,000.00 Date Payment____Feb. 15
Date of invoice__Feb. 3 Terms__________3/15, 2/20, n/45
• Financial Statements is a document reporting business financial performance and resources.
• Types of financial Statements
- Balance Sheet: List of assets, Liabilities and owner’s equity that shows the financial position of the business at
a particular date
Elements of a Balance Sheet
- Assets
- Liabilities
- Owner’s Equity
Forms of Preparing a Balance Sheet
1. T-account: is a form of preparing balance sheet that resembles letter “T” showing the assets accounts on the
left hand-side and the liabilities and owner’s equity on the right-hand side. This commonly used by service
businesses.

Orange Services
Balance Sheets
January 31,2013
Assets Liabilities Php 18,000.00
Cash Php 45,000.00 Notes Payable 2,540.00
Accounts Receivable 5,300.00 Account Payable
Prepaid Rent 4,000.00
Supplies 80.00 Owner's Equity
Equipment 45,000.00 Orange, Capital 78,840.00
Php 99,380.00 99,380.00
• 2. Report form shows the assets, liabilities and owner’s equity section in a vertical arrangement. Merchandising
and manufacturing business use this form.

Orange Services
Balance Sheet
January 13,2013
Assets
Cash Php 45,000.00
Accounts Receivable 5,300.00
Prepaid Rent 4,000.00
Supplies 80.00
Equipment Php 45,000.00
Accum. Depreciation 540 44,460.00
98,840.00
Liabilities
Notes Payable Php 18,000.00
Unearned Service Income 2,000.00
Php 20,000.00
• Owner’s Equity
• Orange, Capital
• 78,840.00
• 78,840.00
• Total Liabilities & Owner’s equity
• Php
• 98,840.00
Part of a Balance Sheet
1. heading consist of business name, name of financial statement, date of the balance (specific date)
2. Body Consist of assets, liabilities and owner’s equity
Guidelines in Preparing Balance Sheet
a. The heading of a balance sheet is always placed at the center of the statement, be it a account form, or a report form.
b. The peso sign is placed on the first amount in every mathematical operation and on the grand totals.
c. a single line is ruled across an amount of the balance sheet to indicate addition or subtraction.
d. a double rule is placed under the final total to indicate that the balance sheet has been completed and found to be in
balance.
• Income Statement: summary of the revenue and expenses of a business entity giving information as to the results of
operation for a specific period of time.
Elements of an Income Statement
a. income refers to the amount earned through services rendered or sale of merchandise
b. Expenses refer to the cost of goods or services that are used up in the operation of a particular business activity
Forms of Income statement Presentation
a. Single-Step income statement: usually used by professionals and service business, arranges the accounts such that all
income are grouped together in one section, all expenses are grouped together in another section, and the total expenses are
deducted from the total income. This single operation of subtraction results to the net income or net loss.
 DSD Trading Accounting Services
Income Statement
For the Month Ended January 31, 2013
Revenue

Acounting Fees Earned Php 94,000.00

Less: Expenses
Salary Expense Php 12,000.00
Rent Expense 5,000.00
Advertising Expense 3,000.00
Supplies Expense 7,000.00
Depreciation Expense 830.00
Utilities Expense 4,500.00
Miscellaneous Expense 1,900.00
Total Operating Expense 34,230.00 34,230.00
Net Income 60,270.00
 b. Multiple-step income Statement
This form involves a series of operations of addition and subtraction before arriving at the final figure of a net income or net loss.

Guidelines in Preparing Income Statement

a. The heading of the income Statement is always written at the center of the first line statement
b. The expense accounts maybe arranged according to the magnitude or according to relative importance of the information to the user
c. A peso sign is placed on the first amount in every mathematical operation and on the net income or net loss
d. A single rule is drawn after every operation of addition or subtraction
e. A double rule is drawn after the net income or net loss
• Capital Statement: Summary of the changes in the capital of the business during a specific period of time.
Accounting Fundamentals
Double Entry Bookkeeping: comes from the two sides of an equation:
PROPERTY = OWNERSHIP
Accounting Values or Elements
A. Assets: defined as the economic resources which are owned by a business and are expected to benefit future operations.
B. Liabilities: debts or financial obligations of the business to its creditors and refer to the claims of creditors against the assets of the
business.
C. Owner’s equity: known as the rights claims of the owner over the assets of the business.
Assets: the first element of accounting equation
Classifications of Assets
• Current Assets: includes cash and other assets which can easily be converted into cash, sold, o consumed during normal
business operation.
• Plant or fixed asset: a non-current asset that is more or less permanent in nature, not for sale and exclusively for business use
only and has physical existence.
Current Assets Accounts
• Cash: includes the currency, bank checks, bank deposits, treasury warrants, bank drafts, money orders and other cash
equivalents owned by the business.
- Cash on Hand: refers to cash that has been received by the business but still kept safe within the premises of the business.
-Cash in bank: refers to the un withdrawn deposits in the bank.
• Notes receivable: amounts due from customers or debtors evidenced by a written promissory note.
• Accounts Receivable: are amounts collectible on open accounts of customers for the services rendered in advance.
• Interest Receivable: interest earned in notes receivable but not yet received.
• Allowance for bad debts: an amount deducted from the gross accounts receivable which represents the estimated
uncollectible accounts debtors.
• Merchandise inventory: goods owned and unsold which were purchased by the business for resale at a profit.
• Prepaid expenses: items that are required and paid for in advance.
• Supplies on hand: refer to consumable or disposable items bought for office or shop use and are still unused.
Plant/Fixed Assets Accounts
• Land: the site owned by the business for building sites and other purposes.
• Building: a structured constructed or acquired by the business for use in its operations.
• Equipment: machines used by the business
• Delivery equipment: refers to all kinds of transportation vehicles.
• Accumulated depreciation: represents the total of depreciation expenses allocated to the cost of an assets over its
estimated useful life.
• Tools: materials used in maintaining and operating equipment.
 Classification of Liabilities
• Current Liabilities: debts or obligations of the business that are expected to be liquated.
• Long-term Liabilities: debts or financial obligations of the business that will become due and payable after one year as
evidenced by a promissory note.
Current Liability Accounts
- Notes Payable
- Accounts Payable
- Interest Payable
- Unearned Income
- Other payable: include rent payable, salaries payable, etc.
• Long-term Liability Accounts
- Long-term notes payable
- Mortgage payable
• Owner’s equity accounts
- Owner’s capital: refers to the investment made by the owner plus the earnings from profitable business operation.
- Owner’s draw: refers to the amounts of cash and other assets taken from the business for personal use by the owner.
• Sources of owner’s equity
- Investment by the owner
- Earnings from profitable operation of the business
• Causes of decreases in owner’s equity
- Withdrawals of cash and other assets by the owner for personal use
Elements of Income Statement
• Income : the amount earned through rendering of services or sale of merchandise.
• Expenses: the cost of goods or services that are used in the operation of a particular business activity.
Income accounts
- Service income
- Revenue from fees
- Sales
- Rent Income
- Interest income
Elements of Income Statement
• Income : the amount earned through rendering of services or sale of merchandise.
• Expenses: the cost of goods or services that are used in the operation of a particular business activity.
Income accounts
- Service income
- Revenue from fees
- Sales
- Rent Income
- Interest income
- Depreciation expense
- Tools expense
- Miscellaneous expenses
ASSETS = EQUITIES
• Liabilities: those owning to outsiders or non-owners
• Capital: those owning to owners
EQUITIES: means the right to properties
Fundamental accounting equation: the relationship between assets and liabilities plus owner’s equity.
Assets=Liabilities + Owner’s equity
*Business transaction: an exchange of one value for another.
*Business documents: the starting point for the flow of accounting information through the accounting system into the financial
statement.
*Internal transactions: not exchanges goods or services between the business and outsider but are significant events that must be
recorded.
Effects of Business Transactions upon the Accounting Equation
• Increase in assets = increase in owner’s equity
• Increase in assets = increase in liabilities
• Increase in some forms of assets = decrease in other forms of assets
• Decrease in assets = decrease in owner’s equity
• Increase in some forms of assets = decrease in other forms of liabilities
• Increase in Liabilities = decrease in capital
• Decrease in assets = decrease in liabilities
• Increase in owner’s equity = decrease in liabilities
• Increase in some forms of capital = decrease in other forms of capital
• A T-account consist of two lines, one vertical and one horizontal, and resembles the letter T. the title of the account is
written on the horizontal, top line. Increases and decreases in the account are entered on different sides of the vertical
line.
T-accounts for assets:
Assets + -
T-accounts for liabilities:
Liabilities - +
T-accounts for Owner’s equity:
Owner’s equity - +
• Analyzing Business Transaction using T-Accounts
Account: an accounting device used in summarizing the changes in the assets, liabilities and owner’s equity account caused by
the business transactions and events.
Ledger: means group of accounts; it refers also to the book where the accounts are kept.
Name of the Account Account No.
Left Side Right Side

Debit Slide Credit Side

Value Received equals Value parted with
• DEBIT & CREDIT: simply refer to the position that an entry takes in an account; whether on the left side or on the
right side. It is NOT SYNONYMOUS with increase or decrease.
Identifying the value received and the value given away
ACCOUNT TITLE
Value Received Value Given Away
Left Side Right Side
Rules f Debit and Credit ( That affects the increase and decrease of an account)
• Assets and Expense Accounts
Increases are recorded on the debit side
Decrease are recorded on the credit side

Asset Account Expense Account

Increase Side Decrease Side Increase Side Decrease Side
+ - + -
• Liabilities, Owner’s Equity and Income Accounts
Increases are recorded on the credit side
decreases are recorded on the debit side

Liability Account Owner’s Equity Account

- + - +
Decrease Side Increase Decrease Side Increase Side
Steps in analyzing business transactions using T- Account

1 Determine the names of the account titles affected.

2 Determine the classification of each account
affected.
3 determine how the balance of each account is
changed in terms of increases and decreases
4 Determine the balance side of an account
• Format in Analyzing Business Transaction

• Identify the account titles affected

• Classify the Account
• Determine the effect of the transaction as it increased and
decreases
• Determine the balance side of an account
• (Dr or Cr)
• Recording Business Transaction A T-Account

• Using the format in analyzing business transaction will facilitate

recording these transactions on the proper balance side of an
account
1 recording Investment
Example: Arelica Investment Php 50,000 cash to open a new
business
Identify the account Classifying the Determining the Determining the
titles affected account affect of transaction balance side of an
as it increases and account
decreases (Dr or Cr)

Prepaid Current Asset Increases Debit

cash Owners Equity Increases Debit

Cash: Php 50,000,00 Arelica Capital Php 50,000.00

 • 2 Recording Payment of prepaid Expenses
Example: paid advance rent for Facilities Php 5,000
Identify the Classifying the Determining the Determining the
account titles account affect of balance side of an
Affected transaction as it account
increases and (Dr or Cr)
decreases

Cash Current Asset Increases Debit

Arelica Capital Owners Copy Increases Debit

• Recording Purchases on Credit
Example: Purchased Equipment Worth of Php 8,000 on credit from MPA
Trading
Identify the Classifying the Determining the Determining the
account titles account affect of balance side of an
affected transaction as it account
increases and (Dr or Cr)
decreases

Equipment Current Asset Increases Debit

Accounts Payable Owners equity Increases Debit

Equipment Php 8,000 Accounts Payable Php 8,000

• Recording Collections from accounts Receivable
Example: Collected Php 1,500.00 from the account of nard
Enterprises

Identify the account Classifying the Determining the Determining the

titles affected account affect of transaction balance side of an
as it increases and account
decreases (Dr or Cr)

cash Current asset Increases Debit

Accounts Current Asset Increases Credit

Cash Php 1,500.00 Service Income php 1,500.00

• Recording Withdrawals for Personal use
Example: the owner, Arelica, took Php 1,200 for personal use
Identify the account Classifying the Determining the Determining the
titles affected account affect of transaction balance side of an
as it increases and account
decreases (Dr or Cr)

Cash Current Asset Increases Debit

Accounts Current Asset Increases Credit

Receivable

DSB Drawing Php 1,200,00 Cash Php 1, 200,00

• Payment Of Expenses
Example: Paid Electric and water and water bills for the month Php 2,500
Identify the account Classifying the Determining the Determining the
titles affected account affect of transaction balance side of an
as it increases and account
decreases (Dr or Cr)

Cash Current Asset Increases Debit

Accounts Current Asset Increases Credit

Receivable

Utility Expanses Php 2, 500,00 Cash Php 2,500.00

• Journalization: the process of recording transaction non a journal
Journal: a book of original entry ; a permanent chronological record
of the debits and credits of an individual transactions.
Transaction: the unit of organization in a journal
Official Receipts: a document that gives evidence to a transaction
involving receipts of cash
Service Invoice: gives evidence involving the rendering of services
Credit memo: A document involving allowances granted on services
rendered to a client by giving information on the name of the client,
the amount to be credited and the reason for crediting it
Cash voucher: a document that gives evidence of the payment of
cash by giving information as to the name and the address of the
payee, date of payment amount and explanation of the payment
Check: A document that may be prepared together with the cash
voucher, an order in writing, signed by the depositor, ordering the
bank to pay cash from the depositors account
Purchase Invoice: A business form furnished to the buyer by the
seller on which are listed the goods sold, the method of shipment
and the cost of the items
Sales Invoice: A business from furnished by the seller to the buyer
• Parts of a Journal Entry
Date: Used to record the date When the transaction occurred

Particulars/Description: used to record the accounts affected by the

transaction together with a brief explanation of the transaction

F or P/R: Stands for Folio or Post Reference and service

With God there is NOTHING
• REFERENCE
MET REVIEW LET Specialist, Technology and
Livelihood Education (TLE) K to 12 Orientation
by Romeo S. Ebonte & Cherrypyn B. Barbacena