JOURNALIZING

BUSINESS TRANSACTION

ACCOUNTING 1
 Chart of Accounts

Tinay,
Tinay,
 Tinay’s Salon was formed on March 1, 2018. The transactions
entered by the salon for the first month of operation are
enumerated below.

March 1 Owner invested ₱ 500,000 cash to start the business.

2 Paid rent of a commercial space for the month, ₱ 30,700
5 Purchased supplies in cash, ₱ 100,400
8 Purchased equipment in cash, ₱ 220,500
13 Rendered services to a customer who paid cash, ₱
160,000
14 Purchased additional supplies on account, ₱ 50,200
15 Paid salaries of employees for the first half of the
month, ₱ 30,000
17 Tinay withdrew cash for personal use, ₱10,500
Tinay’s Salon was formed on March 1, 2018. The transactions entered
by the salon for the first month of operation are enumerated below.

18 Partially paid the amount due to supplier for the purchase

on March 14, 2018, ₱ 30,200
19 Borrowed money from the bank, giving ₱90,000, 6-month
non-interest bearing note.
20 Rendered services to a customer on account, ₱80,000
25 Received ₱ 50,000 from a customer on account
28 Paid electricity and water bills, ₱ 20,500
30 Paid the remaining salaries of employees, ₱ 30,000
30 Paid miscellaneous expenses for the month, ₱ 5,300
31 The company determined the amount of supplies used,
₱ 70,200.
155 Prepaid Insurance
BOOK OF ACCOUNTS
BUSINESS TRANSACTION

ACCOUNTING 1
ACCOUNTING 101
 TIME PERIOD CONCEPT

 (Time period principle) in accounting means that

financial information is being reported in a regular
manner, such as monthly, semi-annually, or other time
interval which may make financial reports relevant to
users
 Calendar year
 Fiscal year
Adjusting entries are categorized as follows:
1. Accruals
a. Accrued expenses
b. Accrued revenues
2. Deferrals
a. Prepaid expenses
b. Unearned revenues
3. Depreciation of Property, Plant, and Equipment (PPE)
4. Allowance for Doubtful Accounts
 ACCRUALS
 Accrual basis of accounting means that income is
recognized when earned even though cash is not
yet received , and expenses are recognized when
incurred even though not yet paid
 Accrued Expense
 Are those which have already been incurred but
not yet paid or paid after having been recorded in
the accounting books.

Expense account XXX

Liability account XXX
 1. Interest on notes payable
 Short-tem notes payable- due to be paid within one year
 Long-term notes payable- due to be paid beyond one
year and the related interest is usually paid periodically
(monthly, quarterly or annually)
Principal amount ₱ XXX
Multiply by: Annual interest rate XXX
Annual interest XXX
Multiply by: Fraction of period outstanding
during the year XX/12
months
Interest Expense ₱ XXX
 REQUIRED:

1.Compute the amount of rent expense for year ending

December 31, 2018
2.Compute the amount of insurance expense for year ending
December 31, 2018.
3.Compute the amount of supplies expense for year ending
December 31, 2018.
 DEPRECIATION OF PPE

Plant, Property , and Equipment- are defined as

physical assets which are being used for the
operation of a business (administrative use and
production use).
 DEPRECIATION

- Is the systematic allocation of the depreciable cost

of PPE over its useful life which is due to
deterioration over the passage of time.
STRAIGHT-LINE METHOD
DEPRECIATION
 SAMPLE PROBLEM
Del Mundo bought a truck and lawn mowers last Nov. 2 & 3,
respectively. Del Mundo allocates a full month’s depreciation for
property and equipment bought on or before the 15 day of the
th

month; otherwise, it is half-month’s depreciation. It is estimated that

the truck will have a useful life of five years and a salvage value of ₱
30,000, while the lawn mowers, four-and-a-half years useful life
without salvage value. Compute for the depreciation expenses for
both of the equipment.
 SAMPLE PROBLEM

On April 1, 2018, Valencia Enterprise bought a new

machine costing ₱ 1,300,000. The machine is expected
to give service to the company for 10 years, after which
the salvage value is estimated to be ₱100,000.
Required:
1. Compute for the annual and monthly depreciation
2. Compute for the depreciation expense recognized for 2018.
3. Compute for the balance of accumulated depreciation as of Dec.
31, 2019
4. Compute for the carrying value of the machine as of Dec. 31,
2018
5. Prepare journal entries for the acquisition of the machine and
recognition of depreciation up to the last year of service.
1. Compute for the annual and monthly depreciation
2. Compute for the depreciation expense recognized for 2018.
3. Compute for the balance of accumulated depreciation as of
Dec. 31, 2019
4. Compute for the carrying value of the machine as of Dec.
31, 2018
5. Prepare journal entries for the acquisition of the machine
and recognition of depreciation up to the last year of service.