The Accounting Equation and

the Double-Entry System

Module 2 ACCT101 1st Semester AY 2021 - 2022
LEARNING OBJECTIVES
At the end of this module, the students will be able:
1. Know the financial statements;
2. Define and identify the elements of financial statements;
3. Describe the basic accounting equation;
4. Distinguish between accounting event and transaction;
5. Understand the accounts;
6. Describe the nature of the typical account titles used in recording transactions;
7. Understand the dual effects of transactions;
8. Appreciate the use of financial transaction worksheet;
9. Explain how double entry system follows the rules of accounting equation;
10. Summarize the rules of debits and credits as applied to Balance Sheet and income statement accounts;
11. Determine the normal balance of accounts; and
12. Understand the drawing account.
THE FINANCIAL STATEMENTS
The financial statements are the end products of the accounting
cycle. They provide financial information about an entity to meet
the needs of various users. The financial statements include the
following:
1. Income Statement
2. Balance Sheet or Statement of Financial Position
3. Statement of Changes in Equity/Capital
4. Cash Flow Statement
5. Notes to the Financial Statements
THE FINANCIAL STATEMENTS
✲ The Income Statement shows the results of operations or operating
performance of the entity for a given time period (e.g., year or
month).
✲ The Balance Sheet or Statement of Financial Position reports the
entity’s financial position as of a given date (e.g., as of December
31, 2019).
✲ The Statement of Changes in Equity/Capital shows changes in
owner’s equity or capital for a given time period.
✲ The Cash Flow Statement summarizes sources and uses of cash for
a given time period.
THE BASIC ELEMENTS OF FINANCIAL STATEMENTS

The elements of financial statements as defined

in the 2018 Conceptual Framework are:

✲ Assets, Liabilities and Equity (Financial

Position)
✲ Income and Expenses (Financial
Performance)
THE BASIC ELEMENTS OF FINANCIAL STATEMENTS
Financial Position
✲ Assets are what the entity OWNS.

• They represent present economic resources controlled by

the entity as a result of past events.
• An economic resource is a right that has the potential to
produce economic benefits.
• Examples of assets are cash, amounts due from
customers, and equipment used in the business.
THE BASIC ELEMENTS OF FINANCIAL STATEMENTS
Financial Position
✲ Liabilities are what the entity OWES.

• They are present obligations of the entity to transfer

economic resources as a result of past events.
• Examples of liabilities are amounts payable to suppliers,
banks, and utility companies.
THE BASIC ELEMENTS OF FINANCIAL STATEMENTS
Financial Performance
✲ Income represents increases in assets or decreases

in liabilities, that result in increases to in equity

other than those relating to contributions from
holders of equity claims.
• Examples of income are receipts from customers for
services rendered and interest earned from bank deposits.
THE BASIC ELEMENTS OF FINANCIAL STATEMENTS
Financial Performance
✲ Expenses are decreases in assets or increases in

liabilities that result in decreases in capital/equity,

other than those relating to distributions to owners
or holders of equity claims.
• Examples of expenses are amounts paid for employee
salaries, office supplies, and rent.
THE BASIC ACCOUNTING EQUATION
✲ The basic accounting equation relates the elements
of financial position:
Assets = Liabilities + Capital
✲ At any point in time, an entity’s total assets must
equal its total liabilities and equity.
✲ Variations of the basic equation are as follows:
• Assets – Liabilities = Capital
• Assets – Capital = Liabilities
THE BASIC ACCOUNTING EQUATION
✲ Note that the assets are on the left side of the equation
opposite the liabilities and owner’s equity. This explains
why increases and decreases in assets are recorded in the
opposite manner (“mirror image”) as liabilities and owner’s
equity.
✲ The equation also explains why liabilities and owner’s
equity follow the same rules of debit and credit.
✲ The logic of debiting and crediting is related to the
accounting equation, the equality must always be
maintained.
ACCOUNTING EVENTS AND TRANSACTIONS
✲ Accountants observe many events that they identify,
and measure in financial terms.
✲ An accounting event is an economic occurrence that
causes changes in an enterprise’s assets, liabilities
and/or equity.
✲ Accounting events may be internal actions, such as
the use of equipment for the production of goods or
services. It can also be an external event, such as
purchase of raw materials from supplier.
ACCOUNTING EVENTS AND TRANSACTIONS
✲ A transaction is a particular kind of event that
involves the transfer of something of value between
two entities.
✲ Transactions include acquiring assets from owner/s,
borrowing funds from creditors, and purchasing or
selling of goods or services.
THE ACCOUNT
✲ The account is the basic summary device of
accounting.
✲ A separate account is maintained for each class of
transactions affecting an element appearing in the
balance sheet (assets, liabilities, and capital/equity)
and income statement (income and expenses).
✲ An account serves as a detailed record of the
increases, decreases, and balance of each class of
transactions.
THE ACCOUNT
✲ Examples of accounts are as follows:
Asset Liability Capital / Income Expense
Accounts Accounts Equity Accounts Accounts
Accounts

• Cash • Accounts • Owner’s • Professional • Salaries

• Accounts Payable Capital Fees Expense
Receivable • Notes • Owner’s • Rent • Supplies
• Prepaid Payable Drawing Income Expense
Expenses
• Equipment
THE ACCOUNT
✲ The simplest form of the account is the T
account, so named since it looks like a letter
“T”. It has three parts, as follows:
• Account Title (e.g., Cash)
• Left side or Debit side Account Title
• Right side or Credit side Left Right
Debit Credit
Total Total
TYPICAL ACCOUNT TITLES USED
STATEMENT OF FINANCIAL POSITION
✲ Assets should be classified into two:
• Current Assets
• Non-Current Assets
✲ Liabilities should be classified into two:
• Current Liabilities
• Non-Current Liabilities
✲ Owner’s Equity
• Capital
• Withdrawal
• Income Summary
Statement of Financial Position
Current Assets
✲ Cash is any medium of exchange that a bank will accept for
deposit at face value. It includes coins, currency, checks,
money orders, bank deposits and drafts.
✲ Cash Equivalents are short term, highly liquid investments that
are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value.
✲ Notes Receivable is a written pledge that the customer will pay
the business a fixed amount of money on a certain date.
Statement of Financial Position
Current Assets
✲ Accounts Receivable are claims against customers arising
from sale of services or good on credit. This type of
receivable offers less security than promissory note.
✲ Inventories are assets which are (a) held for sale in the
ordinary course of business; (b) in the process of
production for such sale; or (c) in the form of materials or
supplies to be consumed in the production process or in
the rendering of services.
Statement of Financial Position
Current Assets
✲ Prepaid Expenses are expenses paid for in advance by the
business. It is an asset because the business avoids having
to pay cash in the future for a specific expense. These
include insurance and rent. These prepaid items
(Insurance and rent) represent future economic benefits
(asset), until the time these start to contribute to the
earning process, these then become expenses.
Statement of Financial Position
Non-Current Assets
✲ Property, Plant and Equipment are tangible assets that are
held for use of the enterprise in the production or supply
of goods or services, or for rental to others, or for
administrative purposes and which are expected to be
used during more than one period. Included are such items
as land, building, machinery and equipment, furniture and
fixtures, motor vehicle and equipment.
Statement of Financial Position
Non-Current Assets
✲ Accumulated Depreciation is a contra account that contains
the sum of the periodic depreciation charges. The balance in
this account is deducted from the cost of the related asset such
as building or equipment to obtain book value.
✲ Intangible Asset are identifiable, nonmonetary assets without
physical substance held for use in the production or supply of
goods or services, for rental to others, or for administrative
purposes. These include goodwill, patents, copyrights, licenses,
franchises, brand names, secret processes, subscription lists
and non-competition agreements.
Statement of Financial Position
Current Liabilities
✲ Accounts Payable represents the reverse of account
receivable. By accepting the goods or services, the buyer
agrees to pay for them in the near future.
✲ Notes Payable is like note receivable but in a reverse sense. In
the case of note payable, the business entity is the maker of
the note, that is the business entity is the party who promises
to pay the other party a specified amount of money on a
specified future date.
✲ Accrued Liabilities are amounts owed for unpaid expenses.
Statement of Financial Position
Current Liabilities
✲ Unearned Revenues are payments received by the entity in
advance before providing its customers with goods or services.
The amounts received as advance payment from customers are
recorded in the unearned revenue account (liability method).
When the goods or services are provided to the customer, the
unearned revenue account is reduced and income is
recognized.
✲ Current Portion of Long-Term Debt are portions of mortgage
notes, bonds and other long-term indebtedness which are to
be paid within one year from the balance sheet date.
Statement of Financial Position
Non-Current Liabilities
✲ Mortgage Payable records long-term debt of the business entity
for which the business entity has pledge certain assets as
security to the creditor. In the event that the debt payments are
not made, the creditor can foreclose or cause the mortgage asset
to be sold to enable the entity to settle the claim.
✲ Bonds Payable is a contract between the issuer and the lender
specifying the terms of repayment and the interest to be
charged. Business organizations often obtain substantial sums of
money from lender to finance the acquisition of machinery and
other needed assets. They obtain these funds by issuing bonds.
Statement of Financial Position
Owner’s Equity
✲ Capital is used to record the original and additional
investments of the owner of the business entity. It is
increased by the amount of profit earned during the year
or is decreased by a loss. Cash or other assets that the
owner withdraw from the business ultimately reduce it.
This account title bears the name of the owner.
✲ Withdrawals is an account used to record drawings of the
owner rather than directly reducing the owner’s equity
account.
Statement of Financial Position
Owner’s Equity
✲ Income Summary is a temporary account used at the end
of the accounting period to close income and expenses.
This account shows the profit or loss for the period before
closing to the capital account.
Income Statement
Income
✲ Service Income are revenues earned by performing
services for a customer or client. Example, accounting
services by a CPA firm, legal services by a lawyer and
laundry services by a laundry shop.
✲ Sales are revenues earned as a result of sale of
merchandise. Example, sale of building materials by a
construction supplies firm.
Income Statement
Expenses
✲ Cost of Sales are costs incurred to purchase or to produce
the products sold to customers during the period. It is also
called Cost of Goods Sold. These include salaries or wages,
13th month pay, cost of living allowance and other related
benefits.
✲ Salaries or Wages Expense includes all payments as a
result of an employer-employee relationship.
Income Statement
Expenses
✲ Telecommunications, Electricity, Fuel and Water Expenses
are related to the use of telecommunication facilities,
consumption of electricity, fuel and water.
✲ Rent Expense is for the use of space, equipment or other
asset rentals.
✲ Supplies Expense is the cost of supplies used in the
conduct of daily business.
Income Statement
Expenses
✲ Insurance Expense is the portion of premiums paid on
insurance coverage (on motor vehicle, building, fire,
typhoon or flood, health, or life) which has expired.
✲ Depreciation Expense is the portion of the cost of tangible
assets allocated or charged as expense during the
accounting period.
✲ Uncollectible Accounts Expense is the amount of
receivables estimated to be doubtful of collection and
charged as expense during an accounting period.
Income Statement
Expenses
✲ Interest Expense is an expense related to borrowed funds.
THE DUAL EFFECTS OF TRANSACTION
✲ The dual effect principle is the foundation or basic
principle of accounting. It provides the very basis for
recording business transactions into the records of a
business.
✲ This concept states that every transaction has a dual
or double effect and should therefore be recorded in
two places. 
✲ This is the beginning of the double entry book
keeping system.
FINANCIAL TRANSACTION WORKSHEET
✲ Every financial transaction can be analyzed or
expressed in terms of its effects on the accounting
equation.
✲ The financial transactions will be analyzed by means
of a financial transaction worksheet which is a form
used to analyzed increases and decreases in the
assets, liabilities or owner’s equity of a business
entity.
FINANCIAL TRANSACTION WORKSHEET
Illustration:
Galicano Del Mundo decided to establish a sole
proprietorship business and named it as Del Mundo
Graphics Design. Del Mundo is a graphic designer who
has extensive experience in drawing, layout,
typography, lettering, diagramming and photography.
He possesses the talent to visually communicate to a
target audience with the right combination of words,
images and ideas.
FINANCIAL TRANSACTION WORKSHEET
Del Mundo Graphics can do the layout and production
design of newspapers, magazines, corporate reports,
journals and other publications. The entity can create
promotional displays; marketing brochures for services
and products; packaging design for products; and
distinctive logos for businesses. He also enters into
agreements with clients for the progressive
development and maintenance of their web sites. His
initial revenue stream comes from web designing.
FINANCIAL TRANSACTION WORKSHEET
The owner, Galicano Del Mundo, makes the business decisions. The
assets of the company belong to Del Mundo and all obligations of the
business are his responsibility. Any income that the entity earns belong
solely to Del Mundo.
When a specific asset, liability or owner’s equity item is created by a
financial transaction, it is listed in the financial transaction worksheet
using the appropriate accounts. The worksheet that follows shows the
financial transactions of Del Mundo Graphics Design. The dates are
enclosed in parentheses.
During March, 2019, the first month of operations, various financial
transactions took place. These transactions are described and analyzed
as follows:
FINANCIAL TRANSACTION WORKSHEET
Mar. 1 Del Mundo started his business by depositing
P350,000 in a bank account in the name of Del Mundo
Graphics Design at BPI Poblacion Branch.
Del Mundo Graphics Design
Financial Transaction Worksheet
Month of March, 2019
Date Assets = Liabilities + Owner's Equity
Cash Del Mundo, Capital
Mar 1 350,000 350,000
FINANCIAL TRANSACTION WORKSHEET
Mar. 5. Computer equipment costing P145,000 is acquired on
cash basis. The effect of the transaction on the basic
equation is:
Del Mundo Graphics Design
Financial Transaction Worksheet
Month of March, 2019

Date Assets = Liabilities + Owner's Equity

Cash + Computer Del Mundo,

Capital
Mar 1 350,000 350,000
Mar 5 (145,000) 145,000
205,000 145,000 = 350,000
FINANCIAL TRANSACTION WORKSHEET
Mar. 9. Computer supplies in the amount of P25,000 are
purchased on account.
Del Mundo Graphics Design
Financial Transaction Worksheet
Month of March, 2019

Date Assets = Liabilities + Owner's Equity

Del Mundo,
Cash + Computer + Computer Supplies Accounts Payable Capital
Mar 1 350,000 350,000
Mar 5 (145,000) 145,000
Mar 9     25,000 25,000  
205,000 145,000 25,000 25,000 350,000
    375,000 = 375,000  
FINANCIAL TRANSACTION WORKSHEET
Mar. 11 Del Mundo Graphics Design collected P88,000 in cash for
designing interactive websites for two exporters based inside the
Ortigas Ecozone.
Del Mundo Graphics Design
Financial Transaction Worksheet
Month of March, 2019

Date Assets = Liabilities + Owner's Equity

Cash + Computer + Computer Supplies Accounts Payable Del Mundo,

Capital
Mar 1 350,000 350,000
Mar 5 (145,000) 145,000
Mar 9     25,000 25,000  
Mar 11 88,000       88,000
293,000 145,000 25,000 25,000 438,000
    463,000 = 463,000  
FINANCIAL TRANSACTION WORKSHEET
Mar. 16 Del Mundo paid P18,000 to Ceradoy Bills Express, a one-stop
bills payment service company, for the semi-monthly utilities.
Del Mundo Graphics Design
Financial Transaction Worksheet
Month of March, 2019

Date Assets = Liabilities + Owner's Equity

Cash + Computer + Computer Supplies Accounts Payable Del Mundo,

Capital
Mar 1 350,000 350,000
Mar 5 (145,000) 145,000
Mar 9     25,000 25,000  
Mar 11 88,000       88,000
Mar 16 (18,000)       (18,000)
275,000 145,000 25,000 25,000 420,000
    445,000 = 445,000  
FINANCIAL TRANSACTION WORKSHEET
Mar. 17 The entity has service agreements with several Netpreneurs to maintain
and update their websites weekly. Del Mundo billed these clients P35,000 for
services already rendered during the month.
Del Mundo Graphics Design
Financial Transaction Worksheet
Month of March, 2019

Date Assets = Liabilities + Owner's Equity

Accounts Computer Del Mundo,
Cash + + Computer + Accounts Payable
Receivable Supplies Capital
Mar 1 350,000 350,000
Mar 5 (145,000) 145,000
Mar 9       25,000 25,000  
Mar 11 88,000         88,000
Mar 16 (18,000)         (18,000)
Mar 17   35,000 35,000
275,000 35,000 145,000 25,000 25,000 455,000
      480,000 = 480,000  
FINANCIAL TRANSACTION WORKSHEET
Mar. 19 Del Mundo made a partial payment of P17,000 for the Mar. 9 purchase
on account.
Del Mundo Graphics Design
Financial Transaction Worksheet
Month of March, 2019

Date Assets = Liabilities + Owner's Equity

Cash + Accounts Receivable + Computer + Computer Supplies Accounts Payable Del Mundo,
Capital
Mar 1 350,000 350,000
Mar 5 (145,000) 145,000
Mar 9       25,000 25,000  
Mar 11 88,000         88,000
Mar 16 (18,000)         (18,000)
Mar 17   35,000 35,000
Mar 19 (17,000) (17,000)  
258,000 35,000 145,000 25,000 8,000 455,000
      463,000 = 463,000  
FINANCIAL TRANSACTION WORKSHEET
Mar. 20 Checks totaling P25,000 were received from clients for billing dated Mar,
17.
Del Mundo Graphics Design
Financial Transaction Worksheet
Month of March, 2019

Date Assets = Liabilities + Owner's Equity

Cash + Accounts Receivable + Computer + Computer Supplies Accounts Payable Del Mundo,
Capital
Mar 1 350,000 350,000
Mar 5 (145,000) 145,000
Mar 9       25,000 25,000  
Mar 11 88,000         88,000
Mar 16 (18,000)         (18,000)
Mar 17   35,000 35,000
Mar 19 (17,000) (17,000)  
Mar 20 25,000 (25,000)        
283,000 10,000 145,000 25,000 8,000 455,000
      463,000 = 463,000  
FINANCIAL TRANSACTION WORKSHEET
Mar. 21 Del Mundo withdrew P20,000 from the business for his personal use.
Del Mundo Graphics Design
Financial Transaction Worksheet
Month of March, 2019

Date Assets = Liabilities + Owner's Equity

Cash + Accounts Receivable + Computer + Computer Supplies Accounts Payable Del Mundo,
Capital
Mar 1 350,000 350,000
Mar 5 (145,000) 145,000
Mar 9       25,000 25,000  
Mar 11 88,000         88,000
Mar 16 (18,000)         (18,000)
Mar 17   35,000 35,000
Mar 19 (17,000) (17,000)  
Mar 20 25,000 (25,000)        
Mar 21 (20,000) (20,000)
263,000 10,000 145,000 25,000 8,000 435,000
      443,000 = 443,000  
FINANCIAL TRANSACTION WORKSHEET
Mar. 27 Warlito Blanche Publishing submitted a bill to Del Mundo for P8,000
worth of newspaper advertisements for this month. Del Mundo will pay this bill
next month.
Del Mundo Graphics Design
Financial Transaction Worksheet
Month of March, 2019

Date Assets = Liabilities + Owner's Equity

Del Mundo,
Cash + Accounts Receivable + Computer + Computer Supplies Accounts Payable
Capital
Mar 1 350,000 350,000
Mar 5 (145,000) 145,000
Mar 9       25,000 25,000  
Mar 11 88,000         88,000
Mar 16 (18,000)         (18,000)
Mar 17   35,000 35,000
Mar 19 (17,000) (17,000)  
Mar 20 25,000 (25,000)        
Mar 21 (20,000) (20,000)
Mar 27         8,000 (8,000)
263,000 10,000 145,000 25,000 16,000 427,000
      443,000 = 443,000  
FINANCIAL TRANSACTION WORKSHEET
Mar. 31 Del Mundo paid his assistant designer salaries of P15,000 for the month.
Del Mundo Graphics Design
Financial Transaction Worksheet
Month of March, 2019

Date Assets = Liabilities + Owner's Equity

Del Mundo,
Cash + Accounts Receivable + Computer + Computer Supplies Accounts Payable
Capital
Mar 1 350,000 350,000
Mar 5 (145,000) 145,000
Mar 9       25,000 25,000  
Mar 11 88,000         88,000
Mar 16 (18,000)         (18,000)
Mar 17   35,000 35,000
Mar 19 (17,000) (17,000)  
Mar 20 25,000 (25,000)        
Mar 21 (20,000) (20,000)
Mar 27         8,000 (8,000)
Mar 31 (15,000)         (15,000)
248,000 10,000 145,000 25,000 16,000 412,000
      428,000 = 428,000  
THE DOUBLE-ENTRY SYSTEM
✲ The logic of debiting and crediting is related to the
accounting equation, the equality must always be
maintained.
✲ Accounting is based on a double-entry system which means

that the dual effect of business transaction is recorded. A

debit side entry must have a corresponding credit side entry.
Each transaction affects at least two accounts. The total
debits for a transaction must always equal the total credits.
• An account is debited when an amount is entered on the left side of account.
• Credited when the amount is entered on the right side of the account.
The Rules of Debit and Credit
✲The account determines how increases or decreases
in it are recorded.
✲The normal balance of any account refers to the side

of the account, either debit or credit as to where

increases are recorded. Assets, owner’s withdrawal
and expense accounts normally have debit balances;
while liability, owner’s equity and income accounts
normally have credit balances.
THE DRAWING ACCOUNT
✲The drawing account is an accounting used in a
business organized as a sole proprietorship or a
partnership, in which is recorded all distributions
made to the owners of the business.
✲They are, in effect, "drawing" funds from the business.
THE USE OF THE T-ACCOUNTS
✲ Analyzing and recording transactions using the
accounting equation is useful in conveying a basic
understanding of how transactions affect the business.
However, it is not an efficient approach once the
number of accounts involved increases. Double-entry
system provides a formal system of classification and
recording business transactions.
✲ Illustration: The rules of debit and credit will be applied
will be applied to the Del Mundo Graphics Design
illustration for comparison.
THE USE OF THE T-ACCOUNTS
Mar. 1 Del Mundo started his business by depositing
P350,000 in a bank account in the name of Del Mundo
Graphics Design at BPI Poblacion Branch.
Assets (Increase) Owner’s Equity (Increase)
Cash Del Mundo, Capital
Debit Credit Debit Credit
3/1 350,000 3/1 350,000
THE USE OF THE T-ACCOUNTS
Mar. 2. Computer equipment is acquired by issuing P50,000
note payable to Maribeth Buenviaje Office Systems. The note
is due in six months.

Assets (Increase) Liabilities (Increase)

Computer Equipment Notes Payable
Debit Credit Debit Credit
3/2 50,000 3/2 50,000
THE USE OF THE T-ACCOUNTS
Mar. 3 Del Mundo paid P15,000 to RF Refozar Suites for rent
on the office studio for the months of March, April, and May.

Assets (Decrease) Assets (Increase)

Cash Prepaid Rent
Debit Credit Debit Credit
3/2 50,000 3/3 15,000 3/3 15,000
THE USE OF THE T-ACCOUNTS
Mar. 4 Received advance payment of P18,000 from Marco
Polo Ortigas Hotel for web site updating for the next three
months.
Assets (Increase) Liabilities (Increase)
Cash Unearned Revenue
Debit Credit Debit Credit
3/2 50,000 3/3 15,000 3/4 18,000
3/4 18,000
THE USE OF THE T-ACCOUNTS
Mar. 5 Computer equipment costing P145,000 is acquired on
cash basis.

Assets (Decrease) Assets (Increase)

Cash Computer Equipment
Debit Credit Debit Credit
3/2 50,000 3/3 15,000 3/2 50,000
3/4 18,000 3/5 145,000 3/5 145,000
THE USE OF THE T-ACCOUNTS
Mar. 9 Computer supplies in the amount of P25,000 are
purchased on account.

Assets (Increase) Liabilities (Increase)

Computer Supplies Accounts Payable
Debit Credit Debit Credit
3/9 25,000 3/9 25,000
THE USE OF THE T-ACCOUNTS
Mar. 11 Del Mundo Graphics Design collected P88,000 in
cash for designing web sites.
Assets (Increase) Owner’s Equity (Increase)
Cash Design Revenues
Debit Credit Debit Credit
3/1 350,000 3/3 15,000 3/11 88,000
3/4 18,000 3/5 145,000
3/11 88,000
THE USE OF THE T-ACCOUNTS
Mar. 16 Del Mundo paid P18,000 to Ceradoy Bills Express for
the semi-monthly utilities.
Assets (Decrease) Owner’s Equity (Decrease)
Cash Utilities Expense
Debit Credit Debit Credit
3/1 350,000 3/3 15,000 3/16 18,000
3/4 18,000 3/5 145,000
3/11 88,000 3/16 18,000
THE USE OF THE T-ACCOUNTS
Mar. 17 Del Mundo billed clients P35,000 for services already
rendered during the month.
Assets (Increase) Owner’s Equity (Increase)
Accounts Receivable Design Revenues
Debit Credit Debit Credit
3/17 35,000 3/11 88,000
3/17 35,000
THE USE OF THE T-ACCOUNTS
Mar. 19 Del Mundo partially paid P17,000 for the Mar. 9
purchase of computer supplies.
Assets (Decrease) Liabilities (Decrease)
Cash Accounts Payable
Debit Credit Debit Credit
3/1 350,000 3/3 15,000 3/19 17,000 3/9 25,000
3/4 18,000 3/5 145,000
3/11 88,000 3/16 18,000
3/19 17,000
THE USE OF THE T-ACCOUNTS
Mar. 20 Received checks totaling P25,000 from clients for
billings dated Mar. 17.
Assets (Decrease) Assets (Decrease)
Cash Accounts Receivable
Debit Credit Debit Credit
3/1 350,000 3/3 15,000 3/17 35,000 3/20 25,000
3/4 18,000 3/5 145,000
3/11 88,000 3/16 18,000
3/20 25,000 3/19 17,000
THE USE OF THE T-ACCOUNTS
Mar. 21 Del Mundo withdrew P20,000 from the business for
his personal use.
Assets (Decrease) Owner’s Equity (Decrease)
Cash Del Mundo, Withdrawals
Debit Credit Debit Credit
3/1 350,000 3/3 15,000 3/21 20,000
3/4 18,000 3/5 145,000
3/11 88,000 3/16 18,000
3/20 25,000 3/19 17,000
3/21 20,000
THE USE OF THE T-ACCOUNTS
Mar. 27 Warlito Blanche billed Del Mundo for P8,000 ads.
Del Mundo will pay next month.
Liabilities (Increase) Owner’s Equity (Decrease)
Accounts Payable Advertising Expense
Debit Credit Debit Credit
3/19 17,000 3/9 25,000 3/27 8,000
3/27 8,000
THE USE OF THE T-ACCOUNTS
Mar. 31 Del Mundo paid his assistant designer salaries of
P15,000 for the month.
Assets (Decrease) Owner’s Equity (Decrease)
Cash Salaries Expense
Debit Credit Debit Credit
3/1 350,000 3/3 15,000 3/31 15,000
3/4 18,000 3/5 145,000
3/11 88,000 3/16 18,000
3/20 25,000 3/19 17,000
3/21 20,000
3/31 15,000