EDU90

Building and Enhancing Literacy Across Curriculum

ACTIVITY No. 4
Business Literacy
(Recording, Posting Transactions and Trial Balance)

NAME: ___________________________________ SECTION: ___________________________

I. List down at least 30 business-related terms during the discussion and define each briefly using your own
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II. Recording Business Transaction
A. In recording business transactions, we observe the rule of double-entry accounting using the following listed
accounts.
ASSETS LIABILITIES EQUITY INCOME EXPENSES
Normal Balances: Normal Balaces: Normal Balances: Normal Balances: Normal Balances:
Debit Credit Credit Credit Debit
(Increases asset (Increases (Increases equity (Increases (Increases
accounts on the liabilities on the on the credit income/revenue expenses on the
debit side, credit side, side, decreases on the credit debit side,
decreases assets decreases equity on the side, decreases decreases
on the credit liabilities on the debit side) income/revenue expenses on the
side) debit side) on the debit side) credit side)

ASSETS = LIABILITIES + EQUITY

EQUITY IS AFFECTED BY NET INCOME/NET LOSS, Therefore:
ASSETS + LIABILITIES + EQUITY + NET INCOME (-NET LOSS)
B. Accounts
1. ASSETS – the wealth of the business
Current Assets:
A. Cash
A1. Cash on hand
A2. Cash in bank
B. Receivables
B2. Accounts Receivable
B3. Notes Receivable
B4. Interest Receivable
C. Inventory
D. Supplies (Office Supplies)
E. Prepaid Expenses
e.g. Prepaid Rent, Prepaid Advertising, etc.
Non-Current Assets
A. Land
B. Equipment / Machinery
Less: Accumulated Depreciation
C. Buildings
Less: Accumulated Depreciation
D. Furniture and Fixtures
Less: Accumulated Depreciation

2. LIABILITIES – obligations of the business to others

Current Liabilities:
A. Payables
A1. Accounts Payable
A2. Notes Payable
A3. Interest Payable
A4. Salaries and Wages Payable
A5. Rent Payable
B. Unearned Revenues
Non-current Liabilities: (Long-termed)
A. Bonds Payable
B. Mortgage Payable

3. EQUITY – the capital of the business

A. Owner’s Equity
Add: Net Income
Less: Owner’s Drawing/Withdrawal
Net Loss

4. INCOME/REVENUES
A. Sales Revenue
Less: Sales Returns and Allowances
Sales Discounts
B. Service Revenue
C. Interest Revenue
D. Gain on Disposal of Assets

5. EXPENSES
A. Advertising Expense I. Insurance Expense
B. Interest Expense J. Salaries and Wages
C. Rent Expense K. Maintenance and Repairs
D. Utilities Expense (light and water billings) L. Supplies Expense (consumed supplies
E. Freight Out (transportation cost on selling goods) M. Loss on Disposal of Assets
F. Depreciation Expense
G. Cost of Goods Sold (consumed Inventory)
 H. Income Tax Expense
C. Example of Business Transactions and their Journal Entries

1. Mr. Atacador deposited Php 3, 000,000 on a checking account to start his bakery business.
Journal Entry: DR. CR.
Cash in bank Php 3,000,000
Owner’s Equity Php 3,000,000
(Initial investment of the owner.)

2. The company issued a check worth Php 10,000 to pay a Prepaid Rent.
Journal Entry: DR. CR.
Prepaid Rent Php 10,000
Cash in bank Php 10,000
(Issued a check to pay a Prepaid Rent.)

3. The company purchased a bakery Equipment on account to Lex Inc. worth Php 300,000.
Journal Entry: DR. CR.
Equipment Php 300,000
Accounts Payable Php 300,000
(Purchased equipment on account.)

4. The company purchased Inventory from HGT worth Php 500,000 paid partly with a check of Php 150,000 and
the balance is on account.
Journal Entry: DR. CR.
Inventory Php 500,000
Cash in bank Php 150,000
Accounts Payable Php 350,000
(Purchased inventory with a check and partly on account.)

5. The company bought office supplies worth Php 10,000 and issued a check.
Journal Entry: DR. CR.
Office Supplies Php 10,000
Cash in bank Php 10,000
(Bought Office Supplies with a check.)

6. The company paid Php 15,000 salaries and wages of their employees via their ATM.
Journal Entry: DR. CR.
Salaries and Wages Php 15,000
Cash in bank Php 15,000
(Paid salaries and wages through ATM.)

7. The company sold Php 300,000 worth of bread to USTP-Oroquieta paid partly in cash of Php 150,000 and the
balance is on account.

Journal Entry: DR. CR.

Cash on hand Php 150,000
Accounts Receivable Php 150,000
Sales Revenue Php 300,000
(Sold bread partly in cash and on account.)

8. The company paid its account to Lex Inc. in full by issuing a check.

Journal Entry: DR. CR.

Accounts Payable Php 300,000
Cash in bank Php 300,000
(Paid the account to Lex Inc.)
 9. The company sold Php 250,000 worth of bread to Mobod Barangay Council and received a check as a full
payment.

Journal Entry: DR. CR.

Cash in bank Php 250,000
Sales Revenue Php 250,000
(Sold bread and received a check.)

10. The company paid the following expenses using the cash on hand:

Water and Electric bills - Php 10,000

Advertising - Php 35,000
Salaries and Wages - Php 15,000
Maintenance and Repairs - Php 5,000
Journal Entry: DR. CR.
Utilities Expense Php 10,000
Advertising Expense Php 35,000
Salaries and Wages Php 15,000
Maintenance and Repairs Php 5,000
Cash on hand Php 65,000
(Paid several expenses.)

11. The company’s Prepaid Rent expires and the following are the balances of its Inventory and Office Supplies:
Inventory, ending - Php 300,000
Office Supplies, ending - Php 5,500

Journal Entry: DR. CR.

Rent Expense Php 10,000
Prepaid Rent Php 10,000
(Prepaid Rent expires.)

Journal Entry: DR. CR.

Cost of Goods Sold Php 200,000
Inventory Php 200,000
(To record consumed inventory.)

Journal Entry: DR. CR.

Office Supplies Expense Php 4,500
Office Supplies Php 4,500
(To record consumed Office Supplies.)

12. The company determined the depreciation cost of the Equipment to be Php 10,000 for this month.

Journal Entry: DR. CR.

Depreciation Expense Php 10,000
Accumulated Depreciation - Equipment Php 10,000
(To record depreciation of equipment.)

Journal Entry: DR. CR.

Accumulated Depreciation - Equipment Php 10,000
Equipment Php 10,000
(To close accumulated depreciation account.)
III. Posting of Recorded Transactions

This is usually done on a Ledger, however, for the sake of discussion, we’ll just use the T-accounts.

Cash in bank Owner’s Equity

Php 3,000,000 Php 10,000 Php 3,000,000
Php 250,000 Php 150,000
Php 10,000
Php 15,000
Php 300,000
Php 3,250,000 Php 485,000
Php 2,765,000

Prepaid Rent Equipment

Php 10,000 Php 10,000 Php 300,000 Php 10,000
Php 0 Php 290,000

Accounts Payable Inventory

Php 300,000 Php 300,000 Php 500,000 Php 200,000
Php 350,000 Php 300,000
Php 300,000 Php 650,000
Php 350,000

Office Supplies Salaries and Wages

Php 10,000 Php 4,500 Php 15,000
Php 5,500 Php 15,000
Php 30,000

Cash on hand Accounts Receivable

Php 150,000 Php 65,000 Php 150,000
Php 85,000

Sales Revenue Utilities Expense

Php 300,000 Php 10,000
Php 250,000
Php 550,000

Advertising Expense Maintenance and Repairs

Php 35,000 Php 5,000

Rent Expense Cost of Goods Sold

Php 150,000 Php 200,000

Office Supplies Expense Depreciation Expense

Php 4,500 Php 10,000
IV. Preparing a Trial Balance.
Trial balance – a preliminary tool in checking the accuracy of your transactions records and posting in the ledger
before the preparation of the financial statements. Write all accounts with debit balances first, followed by the accounts
with credit balances. The debit and credit totals shall be equal. An example Trial Balance is presented from the previous
transactions we had, as follows:

ATACADOR BAKESHOP
Trial Balance
As of ______________.

Debit Credit
Cash in bank Php 2,765,000
Cash on hand 85,000
Accounts Receivable 150,000
Inventory 300,000
Office Supplies 5,500
Equipment 290,000
Cost of Goods Sold 200,000
Salaries and Wages 30,000
Rent Expense 10,000
Utilities Expense 10,000
Office Supplies Expense 4,500
Adveritisng Expense 35,000
Maintenance and Repairs 5,000
Depreciation Expense 10,000
Accounts Payable Php 350,000
Owner’s Equity 3,000,000
Sales Revenue 550,000

TOTAL Php 3,900,000 Php 3,900,000