OLIVAREZ COLLEGE

DR. PABLO R. OLIVAREZ – SENIOR HIGH SCHOOL

ABM 005: FUNDAMENTALS OF ACCOUNTANCY, BUSINESS MANAGEMENT 1
Module No. 7: BUSINESS TRANSACTIONS AND THEIR ANALYSIS AS APPLIED TO THE ACCOUNTING CYCLE OF
BUSINESS; RULES OF DEBITS AND CREDITS; AND JOURNALIZING

I. OUTCOMES OF LEARNING
1. Describe the nature and give examples of business
transactions.

2. Analyze common business transactions using the

rules of debit and credit and the accounting equation.

II. LESSON PRESENTATION

ACCOUNTING CYCLE

GUIDE FOR JOURNAL ENTRIES (ALC-DIE)

ALC – Real Accounts (Accounts Retained after Closing Period)

DIE – Nominal Accounts (Accounts Eliminated/Zero-Out after Closing Period)

DEBIT (DR.) MAJOR ACCOUNT TITLES CREDIT (CR.)

(+)/NORMAL BALANCE ASSET: REAL (-)
(-) LIABILITY: REAL (+)/NORMAL BALANCE
(-) CAPITAL: REAL (+)/NORMAL BALANCE
1. DRAWING 1. INVESTMENT
2. NET LOSS 2. NET INCOME
(+)/NORMAL BALANCE DRAWING (-)
1. CLOSED/ELIMINATED
 OLIVAREZ COLLEGE
DR. PABLO R. OLIVAREZ – SENIOR HIGH SCHOOL
ABM 005: FUNDAMENTALS OF ACCOUNTANCY, BUSINESS MANAGEMENT 1
Module No. 7: BUSINESS TRANSACTIONS AND THEIR ANALYSIS AS APPLIED TO THE ACCOUNTING CYCLE OF
BUSINESS; RULES OF DEBITS AND CREDITS; AND JOURNALIZING

(-) INCOME (+)/NORMAL BALANCE

1. CLOSED/ELIMINATED
(+)/NORMAL BALANCE EXPENSE (-)
1. CLOSED/ELIMINATED

SAMPLE TRANSACTIONS – INC (Increase); DEC (Decrease)

1. Owner invests cash.

Dr. Cr.
Cash (A) xx – INC
Capital (C) xx – INC

2. Owner invests equipment.

Equipment (A) xx – INC

Capital (C) xx – INC

3. Rendered services for cash.

Cash (A) xx – INC

Service Income (E and I) xx – INC

4. Rendered services on credit/on account.

Accounts Receivable (A) xx – INC

Service Income (E and I) xx – INC

5. In relation to number 4, collection of account.

Cash (A) xx – INC

Accounts Receivable (A) xx – DEC

6. Purchased supplies for cash.

Supplies (A) xx – INC

Cash (A) xx – DEC

7. Returned defective supplies purchased for cash.

Cash (A) xx – INC

Supplies (A) xx – DEC
8. Purchased supplies on credit/on account.

Supplies (A) xx – INC

Accounts Payable (L) xx – INC

9. Returned defective supplies purchased on credit/on account.

Accounts Payable (L) xx – DEC

Supplies (A) xx – DEC

10. Payment of on credit/on account for supplies purchased.

 OLIVAREZ COLLEGE
DR. PABLO R. OLIVAREZ – SENIOR HIGH SCHOOL
ABM 005: FUNDAMENTALS OF ACCOUNTANCY, BUSINESS MANAGEMENT 1
Module No. 7: BUSINESS TRANSACTIONS AND THEIR ANALYSIS AS APPLIED TO THE ACCOUNTING CYCLE OF
BUSINESS; RULES OF DEBITS AND CREDITS; AND JOURNALIZING

Accounts Payable (L) xx – DEC

Cash (A) xx – DEC

11. Borrows cash issuing a note.

Cash (A) xx – INC

Notes Payable (L) xx – INC

12. Pays the note in full.

Notes Payable (L) xx – DEC

Cash (A) xx – DEC

13. Lent cash to a borrower issuing a note.

Notes Receivable (A) xx – INC

Cash (A) xx – DEC
14. Collected cash from the borrower.

Cash (A) xx - INC

Notes Receivable (A) xx – DEC
15. Owner withdrew cash for personal use.

Drawing (D) xx – INC

Cash (A) xx – DEC

16. Payment of expenses for cash. (For the list of expenses, refer to module 5 except depreciation and
doubtful accounts)

Utilities Expenses (Exp) xx – INC

Cash (A) xx – DEC

17. Unpaid expenses.

Utilities Expenses (Exp) xx – INC

Utilities Payable (L) xx – DEC

18. Advance payment of expenses.

Prepaid Expense (A) xx – INC

Cash (A) xx – DEC

19. Invested cash and equipment. (Sample compound entry)

Cash (A) xx – INC

Equipment (A) xx – INC
Capital (C) xx – INC

20. Purchased a land with a downpayment and the remaining balance will be payable.

Land (A) xx – INC

Cash (A) xx – DEC
Accounts Payable (L) xx – INC
 OLIVAREZ COLLEGE
DR. PABLO R. OLIVAREZ – SENIOR HIGH SCHOOL
ABM 005: FUNDAMENTALS OF ACCOUNTANCY, BUSINESS MANAGEMENT 1
Module No. 7: BUSINESS TRANSACTIONS AND THEIR ANALYSIS AS APPLIED TO THE ACCOUNTING CYCLE OF
BUSINESS; RULES OF DEBITS AND CREDITS; AND JOURNALIZING

21. Rendered service to a customer receiving only partial payment and the remaining balance will be
receivable.

Cash (A) xx – INC

Accounts Receivable xx – INC
Service Income xx – INC

I
III. NTERACTIVE DISCUSSION QUESTIONS

Illustrative Problem:

Direction: Journalize the following transactions. It is highly encouraged to write on the

separate sheet or maximize the columns provided below.

Ellen Almoro is a painting contractor. During the month of April, completed the following transactions:

April 2 Invested in the business painting equipment valued at Php 12,300.00 and
placed Php 71,000.00 in a business checking account.
3 Acquired a service vehicle costing Php 80,000.00. Paid Php 50,000.00
cash and signed a note for the balance.
4 Purchased painting supplies on account for Php 3,200.00.
5 Completed a painting job and billed the customer Php 4,800.00.
7 Received Php 1,500.00 cash for painting an apartment room.
10 Purchased painting supplies for Php 1,600.00 cash.
11 Received Php 4,800.00 check from the customer billed on April 5.
12 Paid Php 4,000.00 for an insurance policy for a one-year coverage.
13 Billed a customer Php 6,200.00 for a painting job.
14 Paid the assistant Php 1,500.00 for twenty-five hours’ work.
15 Paid Php 400.00 for a tune-up of the service vehicle.
18 Paid for the painting supplies purchase on April 4.
20 Purchased a new ladder for Php 6,000.00 and painting supplies for
Php 2,900.00 on account.
22 Received a telephone bill for Php 600.00 due next month.
23 Received Php 3,300.00 cash from the customer billed on April 13.
24 Transferred Php 3,000.00 to a personal checking account.
25 Received Php 3,600.00 in cash for painting a two-room apartment.
27 Paid Php 2,000.00 on the note signed for the service vehicle.
29 Paid the assistant Php 1,800.00 for thirty hours’ work.

Date Particulars P/R Debit (Dr.) Credit (Cr.)

 OLIVAREZ COLLEGE
DR. PABLO R. OLIVAREZ – SENIOR HIGH SCHOOL
ABM 005: FUNDAMENTALS OF ACCOUNTANCY, BUSINESS MANAGEMENT 1
Module No. 7: BUSINESS TRANSACTIONS AND THEIR ANALYSIS AS APPLIED TO THE ACCOUNTING CYCLE OF
BUSINESS; RULES OF DEBITS AND CREDITS; AND JOURNALIZING
 OLIVAREZ COLLEGE
DR. PABLO R. OLIVAREZ – SENIOR HIGH SCHOOL
ABM 005: FUNDAMENTALS OF ACCOUNTANCY, BUSINESS MANAGEMENT 1
Module No. 7: BUSINESS TRANSACTIONS AND THEIR ANALYSIS AS APPLIED TO THE ACCOUNTING CYCLE OF
BUSINESS; RULES OF DEBITS AND CREDITS; AND JOURNALIZING
 OLIVAREZ COLLEGE
DR. PABLO R. OLIVAREZ – SENIOR HIGH SCHOOL
ABM 005: FUNDAMENTALS OF ACCOUNTANCY, BUSINESS MANAGEMENT 1
Module No. 7: BUSINESS TRANSACTIONS AND THEIR ANALYSIS AS APPLIED TO THE ACCOUNTING CYCLE OF
BUSINESS; RULES OF DEBITS AND CREDITS; AND JOURNALIZING

IV. VALUES REFLECTION

What values you must consider in preparing error-free journal entries? Explain.

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V. ACTIVITY ENGAGEMENT
Direction: Write whether increase or decrease.

1. Increase in ASSET is __________________ in OWNER’S EQUITY

2. Decrease in LIABILITY is _______________ in OWNER’S EQUITY.
3. Increase in Income is __________________ in OWNER’S EQUITY.
4. Increase of EXPENSES is ________________ in OWNER’S EQUITY.
5. Increase in DRAWING is ________________ in OWNER’S EQUITY.

VI. RESEARCH EXPLORATION

Direction: Conduct research for the following questions:

1. Do journalizing plays a vital role in preparing financial statements? Explain.

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2. What are the effects of omitting the journal entry process?

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 OLIVAREZ COLLEGE
DR. PABLO R. OLIVAREZ – SENIOR HIGH SCHOOL
ABM 005: FUNDAMENTALS OF ACCOUNTANCY, BUSINESS MANAGEMENT 1
Module No. 7: BUSINESS TRANSACTIONS AND THEIR ANALYSIS AS APPLIED TO THE ACCOUNTING CYCLE OF
BUSINESS; RULES OF DEBITS AND CREDITS; AND JOURNALIZING

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I
VII. NTEGRATION PROCESS AND SYNTHESIS

BUSINESS TRANSACTIONS AND THEIR ANALYSIS AS APPLIED TO THE ACCOUNTING CYCLE OF A

BUSINESS; RULES OF DEBITS AND CREDITS; AND JOURNALIZING

➢ The normal balance of asset, drawing and expense accounts is DEBIT.

SYNTHESIS

➢ The normal balance of liability, capital and income accounts is CREDIT.

➢ Asset, liability and capital are considered REAL ACCOUNTS. These accounts are retained after closing
entry.
➢ Drawing, income and expense are considered NOMINAL ACCOUNTS. These accounts are eliminated after
closing entry.

Direction: Write down five (5) words that you learned from the lesson. Use the words in formulating concept map.

Words:

1._______________________
2._______________________
3._______________________
4._______________________
LEARNING REFLECTION

5._______________________

Concept Map:
 OLIVAREZ COLLEGE
DR. PABLO R. OLIVAREZ – SENIOR HIGH SCHOOL
ABM 005: FUNDAMENTALS OF ACCOUNTANCY, BUSINESS MANAGEMENT 1
Module No. 7: BUSINESS TRANSACTIONS AND THEIR ANALYSIS AS APPLIED TO THE ACCOUNTING CYCLE OF
BUSINESS; RULES OF DEBITS AND CREDITS; AND JOURNALIZING

VIII. ASSESSMENT OF LEARNING

Direction: Encircle the letter of the correct answer.

1. The normal balance of any account is the

a. left side.
b. right side.
c. side which increases that account.
d. side which decreases that account.

2. A credit is not the normal balance for which account listed below?
a. Capital account
b. Revenue account
c. Liability account
d. Drawing account

3. Which of the following correctly identifies normal balances of accounts?

a. Assets Debit
Liabilities Credit
Owner's Equity Credit
Revenues Debit
Expenses Credit

b. Assets Debit
Liabilities Credit
Owner's Equity Credit
Revenues Credit
Expenses Credit
c. Assets Credit
Liabilities Debit
Owner's Equity Debit
Revenues Credit
Expenses Debit

d. Assets Debit
Liabilities Credit
Owner's Equity Credit
Revenues Credit
Expenses Debit

4. The best interpretation of the word credit is the

a. offset side of an account.
b. increase side of an account.
c. right side of an account.
d. decrease side of an account.

5. In recording an accounting transaction in a double-entry system

a. the number of debit accounts must equal the number of credit accounts.
b. there must always be entries made on both sides of the accounting equation.
c. the amount of the debits must equal the amount of the credits.
d. there must only be two accounts affected by any transaction.

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 OLIVAREZ COLLEGE
DR. PABLO R. OLIVAREZ – SENIOR HIGH SCHOOL
ABM 005: FUNDAMENTALS OF ACCOUNTANCY, BUSINESS MANAGEMENT 1
Module No. 7: BUSINESS TRANSACTIONS AND THEIR ANALYSIS AS APPLIED TO THE ACCOUNTING
CYCLE OF A BUSINESS; RULES OF DEBITS AND CREDITS; AND JOURNALIZING

IX. NETWORK LINKS, DIGITAL SOURCES AND REFERENCES

Network
Google Classroom

Text Book
Valix, C. (2018). Theory Financial Accounting. PFRS Conceptual Framework for Financial Report – By
Philippine Institute Certified Public Accountants

Manalo, M. (2016). Fundamentals of Accountancy, Business and Management 1. Phoenix Publishing

House

Ong, F. (2016). Fundamentals of Accountancy, Business and Management 1. C&E Publishing, Inc.

Website

file:///C:/Users/Nazarene/Desktop/ABM005/TestBank_Kieso_AccountingPrinciples8e.pdf

MODULE 7: BUSINESS TRANSACTIONS AND THEIR ANALYSIS AS APPLIED TO THE ACCOUNTING CYCLE OF BUSINESS; RULES OF DEBITS
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AND CREDITS; AND JOURNALIZING