BOHOL ISLAND STATE UNIVERSITY – MAIN CAMPUS

C.P.G. North Avenue, Tagbilaran City

6300 Bohol, Philippines

PROJECT IN ENGINEERING
ACCOUNTING ( ES-322 )

1st Semester S.Y. 2018 – 2019

Kleint T. Ocial
BSCE – 4A

Engr. Edith E. Albit, Ph.D

Instructor
 TRANSACTION

A transaction is a business event that has a monetary impact on an

entity's financial statements, and is recorded as an entry in its accounting
records. A high-volume transaction, such as a billing to a customer, may be
recorded in a specialized journal, which is then summarized and posted to
the general ledger. Alternatively, lower-volume transactions are posted
directly to the general ledger.

OCIAL’S MACHINE SHOP

The transactions for the month of April 2018 were as follows:
April 1 - Mr. Kleint Ocial invested Php 880,000 and deposited it to the
bank.
3 - Bought various shop supplies on account, Php 10,000.
5 - Purchased shop machine on cash worth Php 150,000 from BQ
Mall.
7 - Rendered services to the customers on cash Php 30,000 and on
. credit Php 40,000.
9 - Rendered services to customers for cash, Php 35,000.
13 - Received cash Php 5,000 for services that has to be rendered yet
. to Footprints Printing Press.
14 - K. Ocial withdrew cash of Php 15,000.
17 - Paid taxes and licenses, Php 6,800.
19 - Rendered services on account, Php 15,000.
23 - Rendered services for cash, Php 25,000.
26 - Cash advanced by employees deductible against payroll,
. Php 10,000.
29 - Paid utilities expense, Php 20,000.
30 - Rendered service to Footprints Printing Press, Php 15,000 and .
. received cash of Php 10,000 after applying its deposit of Php 5,000
on . April 13.
31 - Paid salaries of machanics and helpers, Php 50,000.
 OCIAL’S MACHINE SHOP
Chart of Accounts

Balance Sheet Accounts

Assets

Account Account Titles

No.
101 Cash in Bank
102 Accounts Receivable
103 Estimated Uncollectible Accounts
104 Supplies Inventory
105 Advances to Employees
106 Machine
107 Accumulated Depreciation

Liabilities

201 Accounts Payable

202 Unearned Service Income

Owner’s Equity

301 K. Ocial, Capital

302 K. Ocial, Withdrawal
303 Income and Expense Summary

JOURNALIZING

Journalizing is the process of recording a business transaction in

the accounting records. It can result in entries to the general ledger or
to subsidiary ledgers. An entry is made to a subsidiary ledger when it involves a
high-volume transaction that management has decided to summarize separately
from the general ledger.
 POSTING

Posting is the act of moving debit and credit account balances from

individual journals to their corresponding ledgers. These ledgers are later used to
create a trial balance used to generate the income statement, balance sheet, and
other financial statements.
 TRIAL BALANCE

A trial balance is a bookkeeping worksheet in which the balances of all

ledgers are compiled into debit and credit account column totals that are
equal. A company prepares a trial balance periodically, usually at the end of
every reporting period. The general purpose of producing a trial balance is to
ensure the entries in a company's bookkeeping system are mathematically
correct.
In a manual system a trial balance was commonly prepared by
the bookkeeper in order to discover whether math errors and/or some posting
errors were made. Today, bookkeeping and accounting software has
eliminated those clerical errors. This means that the trial balance is less
important for bookkeeping purposes since it is almost certain that the total of
the debit and credit columns will be equal.
However, the trial balance continues to be useful for auditors and
accountants who wish to show 1) the general ledger account balances prior to
their proposed adjustments, 2) their proposed adjustments, and 3) all of the
account balances after the proposed adjustments. These final balances are
known as the adjusted trial balance, and these amounts will be used in the
organization's financial statements.
Neither the unadjusted trial balance nor the adjusted trial balance is a
financial statement and neither trial balance is distributed to anyone outside of
the accounting and auditing staff. In other words, the trial balance is an
internal document.
 WORKSHEET

An accounting worksheet is a spreadsheet used to prepare accounting

information and reports. Accounting worksheets are most often used in the
accounting cycle process to draft an unadjusted trial balance, adjusting journal
entries, adjusted trial balance, and financial statements.
As with most working papers, accounting worksheets are designed for
internal purposes only. External users like investors and creditors rarely if ever
get to see a company’s accounting worksheet. This means that the worksheet
format can be flexible. Companies can customize the format of their worksheets
to fit their internal demands and work flow needs.
 ADJUSTING JOURNAL ENTRIES

Adjusting journal entries are accounting entries made to a company’s

journal of accounts at the end of a financial period. The process allocates income
and expenses to the actual period in which the income or expense occurred. This
is done under revenue recognition principles in accrual basis accounting, as
opposed to the time payment was received or made under cash basis
accounting.

Adjusting journal entries are used to allocate:

 Prepayment of an expense to the period in which the expense is incurred

 Unearned revenue from a received prepayment to the period in which it is
earned
 Accrued expenses that are paid later to the period in which the expense is
incurred
 Accrued revenue that has been earned but is received later to the period
in which it is earned
Adjusting entries are also used to correct errors, and must be completed
before a company’s financial statements can be issued. Here are some common
scenarios:

 No entries have been made in the company’s accounting records for

certain expenses or revenues, but those expenses and/or revenues occurred
in the period and must be included in the period’s income statement and
balance sheet
 An entry has been made in the company’s accounting records, but the
amount needs to be moved to the period in which the expense is incurred or
the revenue is earned or divided up between two or more accounting periods
 Something is booked to a capital account like Fixed Assets that, under
company policy, should be booked to an expense account like Supplies
Expense, or vice versa
ADJUSTMENTS

The following are the given data for the end-of-the month adjustments in Ocial’s
Machine Shop:
1. 1% of the outstanding receivable account is estimated to be
doubtful of collection.

Php 20,000.00 - Accounts Receivable

x 0.01 - % of Allowance
Php 200.00

2. The machine has an estimated life of 5 years without salvage

value.

Monthly Depreciation Expense:

Annual Depreciation Expense ÷ No. of months in a year
*where Annual Depreciation = Cost of Asset ÷ Estimated life in
years
Php 150,000.00 ÷ 5 years = Php 30,000.00 (Annual Dep. Cost)
Php 30,000.00 ÷ 12 mos. = Php 2,500.00 (Monthly Dep. Cost)
 FINANCIAL STATEMENTS

Financial statements are a collection of reports about an organization's

financial results, financial condition, and cash flows. They are useful for the
following reasons:

 To determine the ability of a business to generate cash, and the

sources and uses of that cash.
 To determine whether a business has the capability to pay back its
debts.
 To track financial results on a trend line to spot any looming profitability
issues.
 To derive financial ratios from the statements that can indicate the
condition of the business.
 To investigate the details of certain business transactions, as outlined
in the disclosures that accompany the statements.

The standard contents of a set of financial statements are:

 Balance sheet.  Shows the entity's assets, liabilities, and

stockholders' equity as of the report date. It does not show information that
covers a span of time.
 Income statement .  Shows the results of the entity's operations and
financial activities for the reporting period. It includes revenues, expenses,
gains, and losses.
 Statement of cash flows .  Shows changes in the entity's cash flows
during the reporting period.
 Supplementary notes . Includes explanations of various activities,
additional detail on some accounts, and other items as mandated by the
applicable accounting framework, such as GAAP or IFRS.

POST-CLOSING TRIAL BALANCE

The post-closing trial balance is a list of all accounts and their balances
after the closing entries have been journalized and posted to the ledger. In other
words, the post-closing trial balance is a list of accounts or permanent accounts
that still have balances after the closing entries have been made.
This accounts list is identical to the accounts presented on the balance
sheet. This makes sense because all of the income statement accounts have
been closed and no longer have a current balance. The purpose of preparing the
post-closing trial balance is verify that all temporary accounts have been closed
properly and the total debits and credits in the accounting system equal after the
closing entries have been made.
 CLOSING ENTRIES

Closing entries, also called closing journal entries, are entries made at the
end of an accounting period to zero out all temporary accounts and transfer their
balances to permanent accounts. In other words, the temporary accounts are
closed or reset at the end of the year. This is commonly referred to as closing the
books.
At the end of the year, all the temporary accounts must be closed or reset,
so the beginning of the following year will have a clean balance to start with. In
other words, revenue, expense, and withdrawal accounts always have a zero
balance at the start of the year because they are always closed at the end of the
previous year.
 Income Statement Accounts
Income

Account Account Titles

No.
401 Shop Income

Expense

501 Uncollectible Accounts

502 Depreciation Expense
503 Salaries Expense
504 Utilities Expense
505 Taxes and Licenses