Fundamentals of Accountancy, Business, and Management 2

Topic: Financial Statements

1. General Journal
2. T-Accounts
3. Unadjusted Trial Balance
4. Adjusting Entries
5. Adjusted Trial Balance
6. Statement of Comprehensive Income
7. Statement of Changes in Equity
8. Statement of Financial Position
9. Worksheet

Transaction:

Ms. Esterlina Guevarra open her business namely Wedding “R” Us on May 1, 2023.

May 1 Esterlina Gevera is a social Entrepreneur from the South. She is into a lot of interesting causes. Her
fine taste is preeminent such that she is considered an authority in planning weddings. Upon the advice
and prodding of an esteemed colleague, Gloria Detoya, Gevera decide to organize her wedding
consultancy. She invested P250,000 into this entity.

May 1 Rented Office Space and paid two months rent in advance, P8,000.

May 2 Esterlina Gevera issued a promissory note for a P210,000 loan from a Metrobank. This availment will
be issued for the acquisition of a service vehicle. The note carries a 20% interest per annum. The
arrangement with the bank is that both the interest and the principal are payable in full one year.

May 2 Hired an office assistant and an account executive each with a P7,800 monthly salary. Or, each is to
receive P300 per day for the 26-day work month. No entry is necessary at this point. They started work
immediately.

May 3 Acquired service vehicle for P420,000.

May 4 Paid Prudential Guarantee and Assurance, Inc. P14,400 for a one-year comprehensive insurance
coverage on the service vehicle.

May 5 Acquired office equipment from Fair and Square Emporium for P60,000; paying P15,000 in cash and
the balance next month. Note: Compound entry is needed for this transaction.

May 8 Purchased Supplies on credit for P18,000 from San Jose Merchandising.

May 9 Paid San Jose Merchandising P10,000 of the amount owed.

May 13 Paid Salaries, P6,600. the entity pays salaries every two Saturdays

May 15 The entity is earning additional revenues by referring consulting clients to friendly hotels, caterers,
printers and couturiers. Received P10,000 advance fees for the three clients referred.

May 19 Coordinated and finalized elaborate bridal arrangements for three couples and billed fees of P12,000
per couple. Additional services include documents preparation, consultation with a feng shui expert as
to the ideal wedding date for prosperity and harmony, provision for limousine service and honeymoon
trip.

May 25 Gevera withdrew P14,000 for personal expenses.

May 27 Paid Salaries, P7,200.

May 30 Received the ICC-Bayan Tel Telephone bill, P1,400.

May 30 Received P24,000 from two clients for services billed last May 19.

May 31 Settled the electricity bill of P3,000 for the month.

Adjustments: For reading and analyzation ONLY. With correct answers na po ito.
Adjustments:

a. On May 1, Weddings "R" Us paid P8,000 for two months's rent in advance. This expenditure resulted
to an asset consisting of the right to occupy the office for two months. A portion of the asset expires and
becomes an expense each day. By May 31, one-half of the asset expired, and should be treated as an
expense.

b. Wedding "R" US acquired a one-year comprehensive insurance coverage on the service vehicle and
paid P14,400 premiums. In a manner similar to prepaid rent, prepaid insurance offers protection that
expires daily.

c. On May 8, Wedding "R" Us purchased supplies, P18,000. During the month, the entity usewd supplies
in the process of performing services for clients. At the end of the accounting period, Gevera makes a
careful physical inventory of the supplies. The inventory count showed that supplies costing P15,000
are still on hand.

d. Gevera estimated that the service vehicle,which was bought on May 4, will last for seven years (eighty
four months) and with a salvage value of P84,000.

e. The office equipment that was acquired on May 5 willl have a useful lefe for five years (60 months) and
will be worthless at that time.

f. On May 15, Wedding "R" Us received P10,000 as an advance payment for referrals made. Assume that
by the end of the month, one of the three couples referred has already taken their marriage vows and
as a result the amount of P4,000 pertaining to th referred event has been realized.

g. Entities pay their employees at regular intervals. It can be weekly, semi-monthly or monthly. Weekly
payrolls are usually made on Fridays or Saturdays.Gevera pays salaries every two Saturdays. Each of
the employees's salariy rate is P7,800 per month or P300 per day (7,800/26). the expense to be
accrued is P1,800 (P300 x 3 days x 2 day employees.) MAy 29,30,31 was not paid.

h. On May 2,Gevera borrowed P210,000 from Metrobank. She issued a promissory note that carried a
20% interest per annum. Both the interest and principal will be payable in one year. The note issued to
the bank accrues interest at 20% annually.

Interest = Principal X Rate x Time

i. wedding "R" Us agreed to arraneg a rush but simple civil wedding for a madly-in-love couple in the
afternoon of May 31. the entity intended to charge fees of P5300 for the services, which is earned but
unbilled. A total of P67,700 in consulting revenues was earned by the entity during the month.

Wedding "R" Us

Adjusting Entries

for the month ended May 31, 2023

a. Rent Expense 4,000

Prepaid Rent 4,000

b. Insurance Expense 1,200

Prepaid Insurance 1,200

c. Supplies Expense 3,000

Supplies 3,000

d. Depreciation Expense 4,000

Accumulated Depreciation - Service Vehicle 4,000

e. Depreciation Expense 1,000

Accumulated Depreciation - Office Equipment 1,000

f. Unearned Referral Revenue 4,000

Referral Revenue 4,000

g. Salaries Expense 1,800

Salaries Payable 1,800

h. Interest Expense 3,500

Interest Payable 3,500

i. Accounts Receivable 5,300

Consulting Revenue 5,300

Chart of Accounts

Cash 110

Accounts Receivable 120

Supplies 130

Prepaid Rent 140

Prepaid Insurance 150

Service Vehicle 160

Accumulated Depreciation - Service Vehicle 165

Office Equipment 170

Accumulated Depreciation - Office Equipment 175

Notes Payable 210

Accounts Payable 220

Salaries Payable 230

Utilities Payable 240

Interest Payable 250

Unearned Referral Revenue 260

Ms. Gevera, Capital 310

Ms. Gevera, Withdrawal 320

Consulting Revenue 410

Referral Revenue 420

Salaries Expense 510

Supplies Expense 520

Rent Expense 530

Insurance Expense 540

Utilities Expense 550

Depreciation Expense - Service Vehicle 560

Depreciation Expense - Office Equipment 570

Interest Expense 580

Wedding “R” Us

Chart of Accounts
Cash 110
Accounts Receivable 120
Supplies 130
Prepaid Rent 140
Prepaid Insurance 150
Service Vehicle 160
Accumulated Depreciation - Service Vehicle 165
Office Equipment 170
Accumulated Depreciation - Office Equipment 170
Notes Payable 210
Accounts Payable 220
Salaries Payable 230
Utilities Payable 240
Interest Payable 250
Unearned Referral Revenue 260
Gevera, Capital 310
Gevera, Withdrawal 315
Consulting Revenue 410
Referral Revenue 420
Salaries Expense 510
Supplies Expense 520
Rent Expense 530
Insurance Expense 540
Utilities Expense 550
Depreciation Expense - Service Vehicle 560
Depreciation Expense - Office Equipment 570
Interest Expense 580