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3 - Analysis of Transactionsp Part 1 PDF
3 - Analysis of Transactionsp Part 1 PDF
Analyzing Transactions
Objectives
1. Explain why accounts are used to record and
summarize the effects of transactions on financial
statements.
2. Describe the characteristics of an account.
3. List the rules of debit and credit and the normal
balances of accounts.
4. Analyze and summarize the financial statement
effects of transactions.
5. Prepare a trial balance
6. Prepare income statement and balance sheet
Each financial statement
item, called an account, is
included in the ledger.
A group of
accounts for a
business entity is
called a ledger.
A list of the
accounts in a ledger
is called a chart of
accounts.
Major Account Classifications
Typical entries
Balancing a T-Account
Cash
First, foot
the debit 3,750 850
side. 4,300 1,400
2,900 700
10,950 2,900
Cash
3,750 850
4,300foot the
Next, 1,400
2,900
credit side. 700
10,950 2,900
5,850
Subtract total credits
Cash from total debits to
obtain the account
3,750 850
balance.
4,300 1,400
2,900 700
5,100 10,950 2,900
5,850
Transactions and Balance
Sheet Accounts
On April 1, 2011, Bert Advincula formed the Baguio Driving
Institute. The following transactions occurred for June:
1 The owner invested cash of P250,000.
4 Second hand cars were purchased from relatives and
friends. Gave a 50% down payment of P120,000, balance
payable after a month without interest.
5 Gas and oil paid, P2,000
10 Clients were billed and cash collected for driving lessons,
P24,000.
15 Salaries of P3,500 were paid.
20 Fees of P7,000 were billed to various customers.
25 The owner made a cash withdrawal of P5,000.
27 Utility bills were paid in the amount of P4,000.
30 Lessor (owner of the building) sent a bill for rental due,
P3,000. Paid the bill.
Required:
a. Analyze the transactions above
b. Journalize your analysis
c. Prepare T-accounts
d. Prepare trial balance
e. Prepare income statement and balance sheet
IThe following are the transactions of the Happy Tour and Travel
of Sorio:
March 1 Sorio opened a tour and travel agency by
investing cash of P50, 000 and to cars worth P750, 000.
3 Borrowed P100, 000 from Far East Bank for use in
her business.
7 Bought tables and chairs and paid cash of
P45,000.
15 Various equipment such as electric fan, computer
and typewriter were purchased on account from
National Winner for P55, 000.
18 Sorio made cash withdrawal of P5, 000 for
personal use.
20 The account due to National Winner was paid in
cash
(A) On November 1, Chris Clark
deposits $25,000 in a bank account in
the name of NetSolutions.
JOURNAL Page 1
Post.
Date Description Ref. Debit Credit
2005
1 Nov. 1 Cash 25 000 00
2 Chris Clark, Capital 25 000 00
3 Invested cash in NetSolutions.
4
(A) On November 1, Chris Clark
deposits $25,000 in a bank account in
the name of NetSolutions.
4
5 5 Land 20 000 00
6 Cash 20 000 00
7 Purchased land for building
8 site.
9
10
(B) On November 5,
NetSolutions bought land
for $20,000, paying cash.
10
11 10 Supplies 1 350 00
12 Accounts Payable 1 350 00
13 Purchased supplies on account.
14
15
16
(C) On November 10, NetSolutions
purchased supplies on account
for $1,350.
30
31 30 Accounts Payable 950 00
32 Cash 950 00
33 Paid creditors on account.
34
35
36
(F) On November 30, NetSolutions
paid creditors on account, $950.
OWNER’S EQUITY
Owner’s Equity Accounts
Debit for Credit for
decreases increases
(-) (+)
(D) On November 18, NetSolutions
received fees of $7,500 from
customers for services provided .
14
15 18 Cash 7 500 00
16 Fees Earned 7 500 00
17 Received fees from customers.
18
19
20
(D) On November 18, NetSolutions
received fees of $7,500 from
customers for services provided .
Miscellaneous Expense
Nov. 30 275
In every entry the sum of
the debits always equal
the sum of the credits.
(G) On November 30, a count revealed
that $800 of the supplies inventory
had been used.
25
26 30 Supplies Expense 800 00
27 Supplies 800 00
28 Supplies used during
29 November.
30
31
(G) On November 30, a count revealed
that $800 of the supplies inventory
had been used.
JOURNAL Page 2
Post.
Date Description Ref. Debit Credit
2005
1 Nov. 30 Chris Clark, Drawing 2 000 00
2 Cash 2 000 00
3 Chris Clark withdrew cash for
4 personal use.
(H) On November 30, Chris Clark
withdrew $2,000 in cash from
NetSolutions for personal use.
JOURNAL Page 2
Post.
Date Description Ref. Debit Credit
2005
1 Dec. 31 Prepaid Insurance 2 400 00
2 Cash 2 400 00
3 Paid premium on two-year
4 policy.
JOURNAL Page 2
Post.
Date Description Ref. Debit Credit
2005
1 Dec. 1 Prepaid Insurance 2 400 00
2 Cash 2 400 00
3 Paid premium on two-year
4 policy.
14 1 Cash 14 360 00
15 Unearned Rent 23 360 00
16 Received advanced payment
17 For three months’ rent of land.
Dec. 4 NetSolutions purchased office
equipment on account from Executive
Supply Co. for $1,800.
JOURNAL Page 3
Post.
Date Description Ref. Debit Credit
2005
1 Dec. 13 Wages Expense 51 950 00
2 Cash 11 950 00
3 Paid two week’s wages.
4
Dec. 16 NetSolutions received $3,100 from
fees earned for the first half of
December.
5 16 Cash 11 3 100 00
6 Fees Earned 41 3 100 00
7 Received fees from customers.
8
Dec. 16 Fees earned on account totaled
$1,750 for the first half of
December.
18 21 Cash 11 650 00
19 Accounts Receivable 12 650 00
20 Received cash from customer
21 on account.
Dec. 23 NetSolutions paid $1,450 for
supplies.
22 23 Supplies 14 1 450 00
23 Cash 11 1 450 00
24 Purchased supplies.
25
Dec. 27 NetSolutions paid the receptionist
and part-time assistant $1,200 for
two weeks’ wages.
JOURNAL Page 4
Post.
Date Description Ref. Debit Credit
2005
1 Dec. 31 Utilities Expense 54 225 00
2 Cash 11 225 00
3 Paid utility bill.
4
Dec. 31 NetSolutions received $2,870 from
fees earned for the second half of
December.
5 31 Cash 11 2 870 00
6 Fees Earned 41 2 870 00
7 Received fees from customers.
8
Dec. 31 NetSolutions earned $1,120 on
account for the second half of
December.
The End