PRINCIPLES OF ACCOUNTING

Lesson 3
The Accounting Process – Classifying

Lawrence Zyril D. Lizardo

Instructor
The steps in the accounting cycle:
1. Analyzing the transactions through the source documents (documentation)
2. Recording the transactions in the journal (journalizing)
3. Recording the transactions in the ledger (posting)
4. Preparation of the unadjusted trial balance
5. Preparation of the worksheet
6. Preparation of the financial statements
7. Journalizing and posting the adjusting journal entries (AJE)
8. Journalizing and posting the closing journal entries (CJE)
9. Ruling nominal accounts and balancing real accounts
10. Preparation of the post-closing trial balance
11. Journalizing and posting the reversing journal entries (RJE)
 Classifying (Posting)
What is posting?
• The process of recording transactions in the ledger. Entries are arranged based on the classification of
accounts so that similar transactions will come together so it would be easy to determine the balance of
the accounts.
What is a ledger?
• A loose-leaf page or bound book where business transactions are finally transferred from the journal. It is
sometimes referred to as the book of final entry. It is used to summarize the transactions.
What are the two types of ledgers?
• General ledger - it contains the main accounts or the control accounts
• Subsidiary ledger – contains details of the control account
e.g. the Accounts Receivable general ledger shows a balance of P100,000
(which is composed of 4 customers)
Each customer will have a separate subsidiary ledger that will show
Customer A P30,000
Customer B P20,000
Customer C P10,000
Customer D P40,000
Steps in posting
a. Determine the account number of the account title of the first journal entry (refer to the
chart of accounts)
b. Locate the general ledger (guided by the account number)
c. Record the date
d. Record the particulars (copy the particulars in the general journal)
e. Record the journal reference (journal name and page number e.g. GJ1, which means
general journal page 1)
f. Record the debit amount
g. In the PR of the general journal, record the account number
h. Repeat the same procedures for every journal entry.

For classroom purposes, posting may be done using the T-account (informal), the simple
representation of the general ledger. If the T-account is used, only the date and the amount will
be recorded.
Posting
Juan Dela Cruz established a sole proprietorship known as JDC Taxi Company. The
following were the transactions of the company during the first month of operation.
1. Juan Dela Cruz deposited P100,000 in the bank in the name of JDC Taxi Company.
2. Purchased land as future garage site for P75,000 cash.
3. Purchased P8,500 of gasoline and oil from Petrol Corner on credit.
4. Paid partially P4,000 to Petrol Corner.
5. JDC Taxi earned fares of P45,000 in cash for the month.
6. Paid for the following business expenses:
Wages (P11,250) rent (P8,500) utilities (P1,500) miscellaneous expenses (P750)
7. The company rendered taxi service to a client on account for P25,000.
8. Collected cash from customer on account P15,000.
9. At the end of the month, Juan Dela Cruz withdrew from the business P10,000 in cash
for personal use.
 Classifying (Posting)
1. Juan Dela Cruz deposited P100,000 in the bank in the name of JDC Taxi Company.

Increase in cash 100,000

Increase J. Dela Cruz, capital 100,000

Cash J. Dela Cruz, Capital

1. 100,000 1. 100,000

Journal Entry:

Cash
J. Dela Cruz, Capital
To record the initial investment of J. Dela Cruz
2. Purchased land as future garage site for P75,000 cash.

Increase in land 75,000

Decrease in cash 75,000

Land Cash

2. 75,000 1. 100,000 2. 75,000

Journal Entry:

Land
Cash
To record the purchase of land for cash.
3. Purchased P8,500 of gasoline and oil from Petrol Corner on credit.

Increase in supplies 8,500

Increase in accounts payable 8,500

Supplies Accounts Payable

3. 8,500 3. 8,500

Journal Entry:

Supplies
Accounts payable
To record the purchase of supplies on account.
4. Paid P4,000 to creditors on account

Decrease in cash 4,000

Decrease in accounts payable 4,000

Accounts Payable Cash

4. 4,000 3. 8,500 1. 100,000 2. 75,000

4. 4,000

Journal Entry:

Accounts payable
Cash
To record the partial payment of account.
5. JDC Taxi earned fares of P45,000 in cash for the month.

Increase in cash 45,000

Increase in taxi revenue 45,000

Cash Taxi Revenue

1. 100,000 2. 75,000 5. 45,000

5. 45,000 4. 4,000

Journal Entry:

Cash
Taxi revenue
To record fares earned for the month.
6. Paid for the following business expenses: Wages, P11,250; Rent, P8,500; Utilities, P1,500; Misc. P750
Increase in wages expense 11,250
Increase in rent expense 8,500
Increase in utilities expense 1,500
Increase in misc. expense 750
Decrease in cash 22,000
Cash Wages Expense Rent Expense Utilities Expense

1. 100,000 2. 75,000 6. 11,250 6. 8,500 6. 1,500

5. 45,000 4. 4,000
6. 22,000
Journal Entry:
Wages expense
Misc. Expense Rent expense
6. 750 Utilities expense
Misc. expense
Cash
To record the payment of various expenses.
8. The company rendered taxi service to a client on account for P25,000.

Increase in accounts receivable 25,000

Increase in service income 25,000

Accounts Receivable Taxi Revenue

8. 25,000 5. 45,000
8. 25,000

Journal Entry:

Accounts receivable 2
Service income
To record the taxi service in account.
9. Collected cash from customer on account P15,000.

Increase in cash 15,000

Decrease in accounts receivable 15,000

Cash Accounts Receivable

1. 100,000 2. 75,000 8. 25,000 9. 15,000

5. 45,000 4. 4,000
9. 15,000 6. 22,000

Journal Entry:

Cash
Accounts receivable
To record collection of accounts.
10. At the end of the month, Juan Dela Cuz withdrew from the business P10,000 in cash for personal use.

Increase in drawing 10,000

Decrease in cash 10,000

J. Dela Cruz, Drawing Cash

10. 10,000 1. 100,000 2. 75,000
5. 45,000 4. 4,000
9. 15,000 6. 22,000
10. 10,000

Journal Entry:

J. Dela Cruz, drawing 10,00

Cash
To record the withdrawal of Juan Dela Cruz
for personal use.
 ASSETS LIABILITIES
Cash Accounts Receivable Accounts Payable

1. 100,000 2. 75,000 8. 25,000 9. 15,000 4. 4,000 3. 8,500

5. 45,000 4. 4,000
9. 15,000 6. 22,000
10. 10,000

Supplies Land

3. 8,500 7. 6,000 2. 75,000

 EQUITIES EXPENSES
Wages Expense Rent Expense
J. Dela Cruz, Capital
6. 11,250 6. 8,500
1. 100,000

J. Dela Cruz, Drawing Utilities Expense Misc. Expense

10. 10,000 6. 1,500 6. 750

REVENUES Supplies Expense

Service Income 7. 6,000
5. 45,000
8. 25,000 The recording phase ends here
1. Analyzing transactions through the source documents
2. Journalizing
3. Posting
 ASSETS LIABILITIES
Cash Accounts Receivable Accounts Payable

1. 100,000 2. 75,000 8. 25,000 9. 15,000 4. 4,000 3. 8,500

5. 45,000 4. 4,000 10,000 4,500
9. 15,000 6. 22,000
10. 10,000
160,000 111,000
- 111,000
49,000

Supplies Land

3. 8,500 7. 6,000 2. 75,000

2,500

Start of the summarizing phase (Determining the account balance

to be ready for the next step…Preparation of the Trial Balance)
 EQUITIES EXPENSES
Wages Expense Rent Expense
J. Dela Cruz, Capital
6. 11,250 6. 8,500
1. 100,000

J. Dela Cruz, Drawing Utilities Expense Misc. Expense

10. 10,000 6. 1,500 6. 750

REVENUES Supplies Expense

Service Income 7. 6,000
5. 45,000
8. 25,000
70,000
 JDC Taxi Company
Trial Balance
August 31, 2021
ACCOUNT TITLES DEBIT CREDIT
List all the accounts with their
Cash P49,000
corresponding balance either
debit or credit Accounts receivable 10,000
Supplies 2,500
Land 75,000
Accounts payable P4,500
J. Dela Cruz, capital 100,000
J. Dela Cruz, drawing 10,000
Service income 70,000
Wages expense 11,250
Rent expense 8,500
The bookkeeping
Utilities expense 1,500 function ends
Supplies expense 6,000 here…
Miscellaneous expense 750
TOTAL P174,500 P174,500
Practice Exercises
Required:
Using your journal entries in the previous lesson, post the following transactions in the ledger (use T-
Accounts for discussion purposes)
Exercise 1
2021
August 1 Nigel Castro started a business called, The Gift Repair Shop by investing P10,000 cash.
3 Bought shop supplies for P500 cash.
5 Bought shop equipment on account from Hyundai P5,000.
7 Paid Hyundai P3,600 cash.
10 Rendered services for cash P1,000.
13 Rendered services on account to PNP P2,000.
15 Collected from PNP ½ of the account.
20 Paid rent for the month P1,500.
23 The owner withdrew P300 cash for personal use.
30 Paid tax and license for P500.
Exercise 2
2021
Sept. 1 Ivy Santos invested P5,000 cash in Flawless Beauty Shop.
3 Bought manicure sets and other toiletries for shop use P1,500 cash.
5 Bought display cases, chairs and tables and standing mirror on account from Real
Beauty Supplies, P5,000.
6 Paid taxes and license for P300 cash.
12 Rendered services for cash P1,800.
15 Paid rent for the month P200 cash.
18 Rendered services on account to Access worth P2,000.
21 Bought additional dryers on account from Bree’s Beauty Shop for P2,000.
23 Paid the Philippine Inquirer P400 for advertisement.
Exercise 3
2021
October 2 Migo Cruz opened a TV Repair Shop by Investing P2,000 in the business.
4 Purchased shop supplies for cash P480.
6 Purchased additional supplies P250 and shop equipment P750 on credit
from Electronic Supplies Inc.
8 Repaired the TV set of Karl Reyes and collected P150 cash.
10 Paid electronic Supplies Inc P500 partial settlement of account due.
14 Repaired the TV set of John Rex on credit P180.
18 Paid the monthly utility bill P190.
22 Received P800 from various walk-in customers for repair services.
24 Withdrew P500 from business for personal use.
~ end of the lecture ~