Module 2 Accounting For Service Business PDF

Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314
DETAILED LEARNING MODULE
Title: Accounting for Service Business

Module No. 2
I. Introduction
After you learned about the importance, role, and scope of accounting, you will now need to know a
understand the concept of double entry system of accounting. Learning this concept will help you t
better understand the procedures on accounting for service business. The first three steps
accounting cycle namely: journalizing, posting and preparation of trial balance will also be covered
this module.
II. Learning Objectives

After studying this module, you should be able to:
1. Define the elements of financial statements and understand the concept of double entry sys
of accounting
2. Analyze and state the effects of business transactions
3. List the steps in accounting cycle
4. Detail the standard contents of the general journal and journalize the transactions properly.
5. Apply the rules of debits and credits
6. Post entries from the general journal to the general ledger
7. Prepare and explain the trial balance
8. Locate and correct errors.
III. Topics and Key Concepts

Elements of Financial Statements
Financial Position Financial Performance

-pertains to the liquidity, solvency and the
-pertains
need to the level of income earned
of the entity for additional financing by the entity through the efficient and
effective use of its resources
- comprises of assets, liabilities and equity
- comprises
of of revenue, expenses and
an entity at a particular moment in timenet income or loss of an entity for a
period of time
Asset
 A present economic resource controlled by the entity as a result of past event. An economic
resource is a right that has the potential to produce economic benefits.
 Assets should be classified into current and non-current assets. Under revised Philippi
Accounting Standards (PAS) No. 1, an entity shall classify assets as current when:
a. It expects to realize the asset, opt intends to sell or consume it, in its normal operating
cycle;
b. It holds the asset primarily for the purpose of trading;
c. It expects to realize the asset within twelve months after the reporting period; or
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d. The asset is cash or a cash equivalent unless the asset is restricted from being exchan
or used to settle a liability for at least twelve months after the reporting period
All other assets should be classified as non-current assets
Typical Asset Accounts
Current Assets
1. Cash. Cash is any medium of exchange that a bank will accept for deposit at face value.
2. Cash Equivalents. Under PAS No. 7, these are short term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject to insignificant risk of
change in value.
3. Notes Receivable. A note receivable is a written pledge that the customer will pay the busine
a fixed amount of money on a certain date
4. Accounts Receivable. These are claims against customers arising from sale of goods o
services on credit.
5. Inventories. Under PAS No. 2, these are assets which are held for sale in the ordinary course
of business; in the process of production for such sale; or in the form of materials or supplies
to be consumed in the production process or in the rendering of services
6. Prepaid Expenses. These are expenses paid for by the business in advance.
Non-current Assets
1. Property, Plant and Equipment. Under PAS No. 16, these are tangible assets that are held by
an enterprise for use in production or supply of goods and services, or for rental to others, or
for administrative purposes and which are expected to be used during more than one period
2. AccumulatedDepreciation.It is a contraaccountthat containsthe sum of periodic
depreciation charges.
3. Intangible Assets. Under PAS No. 38, these are identifiable, nonmonetary assets witho
physical substance held for use on the production or supply of goods or services, for rental to
others, or for administrative purposes.
Liabilities
 These are present obligations of the entity to transfer an economic resource as a result of pa
events.
 Under revised Philippine Accounting Standards (PAS) No.1, an entity shall classify a liability
as current when:
a. It expects to settle the liability in its normal operating cycle;
b. It holds the liability primarily for the purpose of trading;
c. The liability is due to settle within twelve months after the reporting period; or
d. The entity does not have an unconditional right to defer settlement of the liability for
at least twelve months after the reporting period.
All other liabilities should be classified as non-current liabilities.
Typical Liability Accounts

Current Liabilities
1. Accounts Payable. This account represents the reverse relationship of the accounts receivabl
By accepting goods or services, the buyer agrees to pay for them in the near future.
2. Notes Payable. The reverse relationship of notes receivable.

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3. Accrued Liabilities. Amounts owed to others for unpaid expenses.

4. Unearned Revenues. When a business entity receives payment before providing its customer
with goods and services, the amounts received are recorded in the unearned revenue accoun
5. Current Portion of Long-Term Debt. These are portions of mortgage notes, bonds and other
long-term indebtedness which are to be paid within one year for the balance sheet date.
Non-Current Liabilities
1. Mortgage Payable. This long term debt of the business entity for which the business entity ha
pledged certain assets as security to the creditors.
2. Bonds Payable. Bonds is a contract between the issuer and the lender specifying the terms o
repayment and the interest to be charged.
Equity
 The residual interest in the assets of the entity after deducting all its liabilities.
Typical Equity Accounts
1. Capital. This account is used to record the original and additional investments of the owner o
the business entity. It is increased by the amount of profit earned during the year or is decrea
by a loss.
2. Withdrawals. When the owner of a business entity withdraws cash or other assets, these are
recorded in the drawing account or withdrawal account rather than directly reducing
owner’s equity account.
3. Income Summary. It is a temporary account used at the end of the accounting period to clos
income and expenses. This account shows the profit or loss for the period before closing to th
capital account
Income
 Increases in assets, or decreases in liabilities, that result in increases in equity, other than th
relating to contributions from holders of equity claims.
Typical Income Accounts
1. Service Income. Revenues earned by performing services for a customer or clients.
2. Sales. Revenues earned as a result of sale of merchandise.
Expenses
 Decreases in assets, or increases in liabilities, that result in decreases in equity, other than th
relating to distributions to holders of equity claims.
Typical Expense Accounts
1. Cost of Sales. The cost incurred to purchase or to produce the products sold to customers du
the period.
2. Depreciation Expense. The portion of the cost of a tangible asset allocated or charge
expense during an accounting period.
3. Uncollectible Accounts Expense. The amount of receivables estimated to be doubtful
collection and charged during an accounting period.

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The Accounting Equation
Assets Liabilities Equity
Debits and Credits – The Double Entry System

 An account is debited when an amount is entered on the left side of the account and credited
when amount is entered on the right side.
 The normal balance of any account refers to the side of the account – debit or credit – where
account increases are recorded.
Balance Sheet Accounts

Assets Liabilities and Equity
Debit Credit Debit Credit
(+) (-) (-) (+)
Increases Decreases Decreases Increases
Normal Balance Normal Balance
Income Statement Accounts

Debited for decreases in equity Credited for increases in equity
Expenses Revenue
Debit Credit Debit Credit
(+) (-) (-) (+)
Increases Decreases Decreases Increases
Normal Balance Normal Balance
Accounting Cycle
1. Identification of transactions to be recorded
2. Transaction are recorded in the journal
3. Journal entries are posted in the general ledger
4. Preparation of trial balance
5. Preparation of worksheet including adjusting entries
6. Preparation of financial statements
7. Adjusting journal entries are journalized and posted
8. Closing journal entries are journalized and posted
9. Preparation of Post-Closing Trial Balance
10. Reversing Journal Entries are journalized and posted

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Step 1 – Transaction Analysis

This is where the accountant gathers information from source documents and determines the impa
of the transaction on the financial position as represented by the equation “assets equals liabilities
equity”.
Step 2 – Journalizing
The Journal
It is a chronological record of entity’s transactions. A journal entry shows all the effects of a busines
transaction in terms of debits and credit. The journal is called the book of original entry.
Types of Journal Entry
1. Simple Entry – only two accounts are affected. Only one account is debited and one account
is credited.
2. Compound Entry – three or more accounts are affected.
Journal Entry Format
Simple entry
Date Account Titles and Explanation
P.R Debit Credit
2020
Aug 24 Cash 10,000
Santos, Capital 10,000
Initial investment
Compound Entry
P.R Debit Credit
2020
Aug 24 Cash 10,000
Computer Equipment 30,000
Initial investment
Step 3 – Posting
 It is the process of transferring data from the journal to the appropriate accounts in the gene
ledger.
 General Ledger. It is called as “reference book”. It is used to classify and summarize
transactions.
 Accounts are the storage units of accounting information and used to summarize changes in
assets, liabilities and equity including income and expenses. The following are a broad
classification of kinds of accounts:
1. Real account – Statement of financial position or so called permanent accounts.
These accounts are not closed and carryover to the next accounting period. (ex. Cash,
AR and PPE)
2. Nominal account – Income statement or temporary capital accounts. These accounts
are closed at the end of the accounting period. (ex. Sales and expenses)

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The Journal

P.R Debit Credit
2020
Aug 24 Cash 10,000
Initial investment
The Ledger
Account: Cash
Date Explanation J.R. Debit Credit Balance
2019
Aug 24 J-1 10,000.00 10,000.00
Account: Santos, Capital

Date Explanation J.R. Debit Credit Balance
2019
Aug 24 J-1 10,000.00 10,000.00
T-account
Cash Santos, Capital
Aug 24 10,000 Aug 24 10,000
Step 4 – Preparation of Unadjusted Trial Balance

Trial Balance
 It is a list of all accounts with their respective debit and credit balances.
 It is prepared to verify the equality of debits and credits in the ledger at the end o
accounting period or at any time the postings are updated.
Locating Errors
1. Error in posting a transaction to the ledger;
a. An erroneous amount was posted to the account
b. A debit entry was posted as a credit or vice versa
c. A debit or credit was omitted
2. Error in determining the account balances:
a. A balance was incorrectly computed
b. A balance was entered in the wrong balance column
3. Error in preparing the trial balance
a. One of the columns of the trial balance was incorrectly added
b. The amount of an account balance was incorrectly recorded on the trial balance

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c. A debit balance was recorded on the trial balance as a credit or vice versa; or a
balance was omitted entirely.
Illustrative Problem
Duque opened COVID Testing Laboratory. The following transactions occurred during Aug of this
year:
Aug 1 Duque invested P 100,000 cash in the professional practice.
Aug 1 Cash 100,000
Duque, Capital 100,000
Aug 3 Bought a laboratory equipment from Roque Lab Equipment Center for P 72,000; paying P
50,000 in cash and the balance on account
Aug 3 Laboratory Equipment 72,000
Cash 50,000
Accounts Payable 22,000
Aug 5 Rented clinic space and paid three months’ rent in advance, P 12,000
Aug 5 Prepaid Rent 12,000
Cash 12,000
Aug 6 Duque issued a promissory note for P 150,000 loan from Chinabank. The note carries a 12%
interest per annum.
Aug 6 Cash 150,000
Note Payable 150,000
Aug 7 Paid cash for medical supplies, P 12,500

Aug 7 Medical Supplies 12,500
Cash 12,500
Aug 10 Billed patients for professional services performed, P 65,000

Aug 10 Accounts Receivable 65,000
Service Revenue 65,000
Aug 12 Paid Roque Lab Equipment Center P 12,000 of the amount owed
Aug 12 Accounts Payable 12,000
Cash 12,000

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Aug 14 The entity is earning additional revenue by referring patients to medical clinic for
consultation. The entity received P 16,000 advance fees for two patients referred.
Aug 14 Cash 16,000
Unearned Referral Revenue 16,000
Aug 15 Received telephone bill, P 1,500

Aug 15 Utilities Expense 1,500
Utilities Payable 1,500
Aug 18 Received P 75,000 cash from walk in patients.

Aug 18 Cash 75,000
Aug 20 Paid salaries, P 25,000 for Aug 1-15 payroll

Aug 20 Salaries Expense 25,000
Cash 25,000
Aug 22 Received P 40,000 from patients previously billed in transaction.

Aug 22 Cash 40,000
Accounts Receivable 40,000
Aug 28 Duque withdrew cash for personal use, P 25,000

Aug 28 Duque, Withdrawal 25,000
Cash 25,000
Aug 30 Paid unpaid telephone bill.

Aug 30 Utilities Payable 1,500
Cash 1,500
Aug 31 Received and paid electric bill, P 15,000

Aug 31 Utilities Expense 15,000
Cash 15,000

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Ledger (T-account)
Cash Notes Payable

8/1 100,000 8/3 50,000 8/6 150,000
8/6 150,000 8/5 12,000 150,000
8/14 16,000 8/7 12,500
8/18 75,000 8/12 12,000 Utilities Payable
8/22 40,000 8/20 25,000 8/30 1,500 8/15 1,500
8/28 40,000
8/30 1,500 1,500 1,500
8/31 15,000 -
381,000 168,000 Unearned Referral Revenue

213,000 8/14 16,000
16,000
Accounts Receivable
8/10 65,000 8/22 40,000 Duque, Capital
8/1 100,000
65,000 40,000 100,000
25,000 100,000
Medical Supplies Duque, Withdrawal

8/7 12,500 8/28 40,000
12,500 40,000
Prepaid Rent Service Revenue

8/5 12,000 8/10 65,000
12,000 8/18 75,000
140,000
140,000
Medical Equipment
8/3 72,000 Salaries Expense
72,000 8/20 25,000
25,000
Accounts Payable
8/12 12,000 8/3 22,000 Utilities Expense
8/15 1,500
12,000 22,000 8/31 15,000
10,000 16,500

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Trial Balance
COVID Testing Laboratory
Trial Balance
Aug 31, 2020
Cash 213,000
Medical Supplies 12,500
Prepaid Rent 12,000
Laboratory Equipment 72,000
Note Payable 150,000
Unearned Referral Revenue 16,000
Duque, Capital 100,000
Duque, Withdrawal 40,000
Salaries Expense 25,000
Utilities Expense 16,500
416,000 416,000
IV. Teaching and Learning Materials and Resources

1. Basic Financial Accounting and Reporting by Ballada
V. Learning Task
Problem 2-1 (Double Entry System – Theories)
Write TRUE if the statement is correct and FALSE if the statement is incorrect.
1. Owner’s equity is the excess of assets over its liabilities.
2. Accounts that appear on the left side of the accounting equation usually have credit balances
3. Income increases owner’s equity and recorded by credits.
4. A cash acquisition of a laptop computer will cause total assets to increase.
5. A debit entry always decreases the balance of an account.
6. Capital represents the owner’s investment, or equity, in a business
7. Accounts Receivable is considered as asset.
8. The owner’s Withdrawals account is listed with the other expenses of a business.
9. Both sides of the fundamental accounting equation must always be equal.
10. When a business receives cash, it is always recorded as an increase to Cash and a decrease
an Expense.
11. Salaries payable is a type of expense.
12. A decrease in liability is recorded by a debit.
13. An increase in revenue is recorded by a credit.
14. Unearned revenues are classified as liabilities on the balance sheet.
15. Office supplies are considered as expenses.

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Problem 2-2 (Recording Business Transactions – Theories)

Write TRUE if the statement is correct and FALSE if the statement is incorrect.
1. A journal entry may include debits to more than one account and credits to more than one
account, but the total of the debits must always equal the total of the credits
2. When payment is received for services not yet rendered, no entry is recorded until that servi
has been rendered
3. In a proper journal entry, credits are always indented
4. When the owner makes an investment, the owner’s Capital account is debited.
5. Transactions are recorded in chronological order in the ledger.
6. In some transactions, the accounting equation may not be maintained.
7. Investments by the owner are recorded in a revenue account.
8. If equipment costing P 93,000 is bought by paying P 30,000 as a down payment an
remaining P 63,000 in 30 days, owner’s equity is increased by P 93,000.
9. When the columns of the trial balance are equal, no errors have occurred in recording
posting the transactions.
10. Entering transactions into the journal is called posting.
11. Accounts receivable is an asset account whose normal balance is a debit.
12. A credit always means an entry on the right side of an account.
13. Trial balance checks the equality of debits and credits
14. A transaction with more than one debit and/or more than one credit is called compound entr
15. In any transaction, the total peso amount of debits must equal the total peso amounts of cre
Problem 2-3 (Elements of Financial Statements)

Compute the amount of the missing element of financial statements
1. Margie Delgado has assets of P 600,000 and owner’s equity of P 450,000.
2. Ryan Morales has liabilities of P 147,000 and owner’s equity of P 236,500.
3. A small accounting firm has expenses of P 163,000 and a profit of P 42,000.
4. A medical practitioner has income of P 362,000 and loss of P 20,000.
5. At the beginning of the year, Cora Gabayan Calling Station has liabilities of P 100,000 and
owner’s equity of P 96,000. If assets increased by P 40,000 and liabilities decreased
30,000, what was the owner’s equity at the end of the year?
At the beginning of the year, Yates Company had total assets of P 550,000 and total liabilities of P
200,000. Answer the following questions viewing each situation as being independent of the others
(1) If total assets increased P 200,000 during the year, and total liabilities decreased P 75,000, wha
the amount of owner's equity at the end of the year?
(2) During the year, total liabilities increased P 230,000 and owner's equity decreased P 90,000.
What is the amount of total assets at the end of the year?

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One item is omitted in each of the following summaries of balance sheet and income statement dat
three different sole proprietorships, A, B, and C. Determine the amounts of the missing ite
identifying each proprietorship by letter.
Proprietorship
A B C
Beginning of the year:
Assets 380,000 150,000 199,000
Liabilities 250,000 105,000 168,000
End of the year:
Assets 450,000 185,000 195,000
Liabilities 280,000 95,000 169,000
During the year:
Additional investment by the owner ? 79,000 80,000
Withdrawals by the owner 90,000 83,000 ?
Revenue 195,000 ? 187,000
Expenses 170,000 113,000 175,000
Problem 2-6 (Transaction Effects on the Basic Accounting Model)

The following are some transactions of Maricel Supan Services:
For each transaction, indicate whether the assets (A), liabilities (L) or owner’s equity (OE) increased
(+), decreased (-) or did not change (0) by placing the appropriate sign in the appropriate column.
A L OE
a. Received cash as additional investment.
b. Purchased supplies on account.
c. Charged customers for services made on account.
d. Rendered services to cash customers
e. Paid cash for rent on building
f. Collected on account receivable in full
g. Paid cash for supplies
h. Returned supplies purchased on account
i. Paid cash to settle accounts
j. Paid cash to owner for personal use
Problem 2-7 (Transaction Analysis)

For each of the following transactions for Dela Cruz Services, a sole proprietorship, fill in the spaces
to answer the following questions:
1. What are the two accounts affected by the transaction?
2. What type of account is affected – asset, liability, owner’s equity, withdrawal, income or
expense account?
3. Should the account be increased or decreased?

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4. Should the account be debited or credited?

Transactions:
a. Received P 260,000 cash from clients for services rendered.
b. Paid P 480,000 of salaries to employees
c. Collected of P 120,000 from clients on account
d. The owner withdrew P 80,000 cash for personal use
e. Purchased P 140,000 of supplies on account
f. Billed client P 180,000 for services rendered
g. Paid P 100,000 to suppliers on account
Increase or
Trans. Accounts Affected Type of Account Debit or Credit
Decrease
a. 1.
2.
b. 1.
2.
c. 1.
2.
d. 1.
2.
e. 1.
2.
f. 1.
2.
g. 1.
2.
Problem 2-8 (Debits and Credits)

Analyze each transaction and show the accounts affected by writing the correct account title in the
appropriate debit or credit column. Indicate no entry, if appropriate.
The following accounts are used by Mendigorin Maintenance Services:
Cash Prepaid Insurance Accounts Payable Service Revenues

Accounts Receivable
Equipment Mendigorin, Capital Rent Expense
Supplies Notes Payable Mendigorin, Withdrawals
Repairs Expense
Mendigorin Maintenance Services completed the following transactions:

Debit Credit
1. Paid for supplies on account last month.
2. Billed customers for services performed.
3. Paid the current month's rent.

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4. Purchased supplies on credit.

5. Received cash from customers for services performed.
6. Acquired equipment on account.
7. Received a bill for repairs.
8. Returned part of the equipment purchased in (6) for
credit.
9. Received cash from customers previously billed.
10. Paid the bill received in (7).
11. Booked an appointment for services.
12. Paid repairs with cash.
13. Made cash withdrawals.
Problem 2-9 (Journalizing Transactions)

Julie Poveda is an experienced events planner. The transactions and accounts for the business are a
follows:
Feb 1 Invested P 100,000 in cash to start her own business.
1 Paid P 5,000 for one month's rent
2 Bought office furnitures for P 15,000 in cash
4 Received delivery of laptop computer, P 54,000. Paid 50% down, balance due in 30 days
5 Performed services for P 12,000 in cash.
7 Performed services for P 10,800 on credit.
9 Acquired a fax machine for P 7,500; paid P 3,000 in cash, balance due in 10 days
11 Received P 5,400 from clients on account.
16 Paid P 10,000 for salaries
18 Settled in full the P 4,500 balance for the fax machine
21 Received P 7,000 cash for services performed
23 Performed services for P 12,000 on credit
25 Paid P 1,350 for the monthly telephone bill
25 Paid P 2,400 for the electric and water bills
28 Collected P 2,000 from clients on account
29 Poveda withdrew P 7,000 in cash for personal expenses.
Required:
Prepare the journal entries to record the transactions listed above. Use the following accounts: Cash
Accounts Receivable; Office Furniture; Office Equipment; Accounts Payable; Poveda, Capital; Poveda
Withdrawals; Consulting Revenues; Salaries Expense; Utilities Expense and Miscellaneous Expense.
Problem 2-10 (Journalizing Transactions)

A Dela Cruz Review School entered into the following transactions during Oct 2020:
Oct 1 Dela Cruz made additional investments of P50,000 in the business.
2 Bought liability insurance for one year, P14,500.
3 Received a bill for advertising from SouthMin News, P3,200.
4 Paid rent for the month, P8,900.

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7 Received a bill for equipment repair from E. Hipolito, P2,880.

10 Received and deposited tuition from students, P62,500.
11 Received and paid the telephone bill, P2,300.
15 Bought chairs from E. Awayan Furniture, P18,800, paying P8,800 in cash and the balance
on account.
18 Paid accounts to SouthMin News, P3,200.
21 Dela Cruz withdrew P8,000 for personal use
24 Received a bill for gas and oil from Mindanao Oil Corp., P1,800.
25 Received and deposited tuition from students, P61,400.
27 Paid salaries of the office assistants, P12,000.
28 Bought a photocopier on account from Dadiangas Office Machines, P7,500.
29 Received P7,000 tuitions from a student who had charged the tuition on account last mon
30 Received and paid the water utilities bill, P3,600.
31 Paid for flower arrangement for front office, P620.
31 Dela Cruz invested personal computer, with a fair market value of P12,300, in the busines
Required:
Prepare the journal entries for the October transactions. Use the following accounts: Cash; Account
Receivable; Prepaid Insurance; Equipment; Furniture; Accounts Payable; Dela, Cruz, Capital; De
Cruz, Withdrawals; School Fees; Salaries Expense; Rent Expense; Gas and Oil Expense; Advertising
Expense; Repair Expense; Supplies Expense; Utilities Expense; Telecommunications Expense a
Miscellaneous Expense.
Problem 2-11 (Journalizing, Posting and Preparing a Trial Balance)

Karen Serrano won a concession to rent out bicycles in the Burnham Park during the summer. Durin
the month of May, Serrano completed the following transactions of her bicycle rental business:
May 2 Began business by placing P 120,000 in a business checking account.
3 Purchased supplies on account for P 1,500.
4 Purchased ten bicycle for P 25,000, paying P 12,000 down and agreed to pay the balance
in thirty days.
5 Paid P 29,000 in cash for a furnished container to store the bicycles and use for other
operations.
6 Received P 4,700 in cash for rentals during the first week of operation
8 Paid P 4,000 in cash for shipping and installation costs (considered an addition to the cos
of the container) to place the container at the park entrance.
9 Hired part time assistants to help on weekends
10 Paid a maintenance person P 750 to clean the grounds
13 Received P 5,000 cash for rentals during the second week of operation.
16 Paid the assistant P 480 for a weekend's work
17 Paid for the supplies purchased on May 3
18 Paid a P 550 repair bill on bicycle.
20 Received P 5,500 in cash for rentals during the third week of operation.

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23 Billed an entity P 1,100 for bicycle rentals for employees' outing
25 Paid the P 3,000 fee for May to the Park Administration for the right to the bicycle conces
27 Received P 4,100 in cash for rentals during the week.
31 Transferred P 5,000 to personal checking account
Required:
1. Prepare the journal entries for the May transactions.
2. Set up the following ledger accounts and post all the journal entries using T-account: Cash;
Accounts Receivable; Supplies; Container; Bicycles; Accounts Payable; Serrano, Capital;
Serrano, Withdrawals; Rental Revenues; Salaries Expense; Maintenance Expense; Repai
Expense; and Concession Fee Expense.
3. Prepare a trial balance.

Cong Marcoleta opened a plumbing service, Gapo Plumbing. Operations began on Sept. 1, 2020 an
the following transactions were completed during the month:
Sept 1 Withdrew P 67,000 from personal savings account and used it to open a new account in
name of Gapo Plumbing.
2 Acquired a service vehicle costing P 81,000. A payment of P 17,500 in cash was made an
a note payable given for the P 63,500 remainder.
3 Paid rent for the month, P 7,150.
6 Acquired plumbing supplies on account P 15,700.
7 Paid for three months of advertising and recorded Prepaid Advertising in the amount of P
8 Cash in the amount of P 18,350 was received for plumbing services rendered.
9 Acquired additional plumbing supplies for cash, P 8,050.
11 Paid salaries, P 11,600.
15 Rendered plumbing services and billed the customer, P 42,200.
16 Paid P 5,700 of the amount owed from the transaction of Sept 6.
19 Paid miscellaneous expenses, P 4,300.
20 Collected P 21,000 from the customer of the Sept 15 transaction,
21 Withdrew P 14,500 from the business.
22 Paid salaries, P 14,100.
24 Paid the first installment of the note payable, P 3,850
25 Paid telephone expense, P 1,250.
27 Billed the Clement Resort for plumbing services rendered, P 14,150.
Required:
1. Prepare the journal entries for the Sept transactions using the following accounts: Ca
Accounts Receivables; Plumbing Supplies; Prepaid Advertising; Service Vehicle; Notes

-1 AY 2020-2021
City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
Payable; Accounts Payable; Marcoleta, Capital; Marcoleta, Withdrawals; Plumbing Revenue;

Salaries Expense; Rent Expense; Telephone Expense; and Miscellaneous Expense.
2. Post the entries to the ledger account using T accounts.
Alex Villanueva is a painting contractor. During the month of April, he completed the follow
transactions:
Apr 2 Invested in the business painting equipment valued at P 12,300 and placed P 71,000 in a
business checking account.
3 Acquired a service vehicle costing P 80,000. Paid P 50,000 cash and signed a note for the
balance.
4 Purchased painting supplies on account for P 3,200.
5 Completed a painting job and billed the customer P 4,800.
7 Received P 1,500 cash for painting an apartment room.
10 Purchased painting supplies for P 1,600 cash.
11 Received a P 4,800 check from the customer billed on April 5.
12 Paid P 4,000 for an insurance policy for a one-year coverage.
13 Billed a customer P 6,200 for a painting job.
14 Paid the assistant P 1,500 for twenty-five hours' work.
15 Paid P 400 for a tune-up of the service vehicle.
18 Paid for the painting supplies purchased on April 4.
20 Purchased a new ladder for P 6,000 and painting supplies for P 2,900 on account.
22 Received a telephone bill for P 600, due next month.
23 Received P 3,300 in cash from the customer billed on April 13.
24 Transferred P 3,000 to a personal checking account.
25 Received P 3,600 in cash for painting a two-room apartment.
27 Paid P 2,000 on the note signed for the service vehicle.
29 Paid assistant P 1,800 for thirty hours' work.
Required:
1. Prepare journal entries to record the April transactions.
2. Set-up the following ledger accounts and post all the journal entries using T-account: Cash;
Accounts Receivable; Painting Supplies; Prepaid Insurance; Painting Equipment; Service
Vehicle; Notes Payable; Accounts Payable; Villanueva, Capital; Villanueva, Withdrawals;
Painting Revenues; Wages Expense; Utilities Expense; and Maintenance Expense.

-1 AY 2020-2021
City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314

Jose Reyes owns the Bonifacio High Jumpers, a collegiate basketball team in the Phil-Am Basketball
Association. Presented below is the Nov 30, 2020 trial balance representing activities from Jan 1, 20
to November 30, 2020:
Bonifacio High Jumpers
Trial Balance
Nov 30, 2020
Account Titles Debit Credit

Cash 1,129,800
Accounts Receivable 3,712,500
Uniform Supplies 31,050
Prepaid Insurance -0-
Land 2,025,000
Training Facilities 12,750,000
Training Equipment 2,625,000
Player Contracts 11,250,000
Notes Payable 1,800,000
Accounts Payable 4,725,000
Mortgage Payable 10,500,000
Reyes, Capital 17,643,750
Reyes, Withdrawals 1,875,000
Game Attendance Revenues 10,125,000
Salaries Expense 4,875,000
Advertising Expense 400,950
Travel Expense 1,532,400
Laundry Expense 528,000
Medical Expense 194,550
Utilities Expense 1,734,000
Miscellaneous Expense 130,500
Totals 44,793,750 44,793,750
During the month of December 2020, the Jumpers were participating in the 2020 playoffs a
following transactions took place:
Dec 1 Acquired the contract of Agustin Tiongco from the Negros Navigators for P 1,875,000;
paying P 225,000 in cash and financing the P 1,650,000 by issuing a note payable.
2 Collected P 2,809,500 on accounts receivable from season-ticket holders.
3 Settled accounts payable, P 1,657,500.
4 Paid for TV advertising, P 78,600.
5 Acquired on account additional uniforms for the upcoming series with the San Alcantara

-1 AY 2020-2021
City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
Padres, P 30,750.
9 Billed season-ticket holders for the last five games, P 320,250.
10 Paid the amount due on this date for the note payable, P 600,000.
11 Acquired insurance for the months of December to June, P 215,250. Record as prepaid
insurance.
12 Acquired additional training equipment on account, P 319,500.
15 Paid players' salaries, P 1,136,250.
17 Received P 3,316,050 cash for tickets to playoff games.
19 Paid travel expenses to San Alcantara, P 558,000.
20 Paid laundry expenses, P 12,600.
23 Paid creditors, P 941,850.
25 Paid miscellaneous expenses. P 26,850.
26 Paid medical expenses, P 18,900.
27 Paid utilities expenses, P 210,450.
28 Paid players' salaries, P 1,240,650.
30 Jose Reyes withdrew P 250,000.
Required:
1. Prepare journal entries for the December transactions.
2. Post the entries in the ledger using T-accounts
3. Prepare a trial balance as at Dec 31, 2020.
Problem 2-15 (Effect of Errors on the Trial Balance)
Explain briefly the reasons underlying your answer and state the amount of the error, if any.
The trial balance prepared by Glen De Leon Consulting as at Sept 30, 2020 was not in balance. In
searching for the error, an employee discovered that a transaction for the purchase of a typewriter
credit for P 6,100 has been recorded by a debit of P 6,100 to the Office Equipment account and a d
of P 6,100 to Accounts Payable. The credit column of the incorrect trial balance has a total of P 926
a. Was the Office Equipment account overstated, understated, or correctly stated in the
balance?
b. Was the total of the debit column of the trial balance overstated, understated, or correctly st
c. Was the Accounts Payable account overstated, understated, or correctly stated in the
balance?
d. Was the total of the credit column of the trial balance overstated, understated or co
stated?
e. How much was the total of the debit column of the trial balance before correction of the erro

-1 AY 2020-2021
City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
Problem 2-16 (Correcting a Trial Balance)

The June 2020 trial balance for Davao Duplicators, owned by Allan Brillantes is presented below. Th
regular has resigned and left the following trial balance. It did not balance.
Davao Duplicators
Trial Balance
June 30, 2020
Cash 44,800
Supplies 70,800
Equipment 560,000
Brillantes, Capital 513,000
Brillantes, Withdrawals 50,000
Revenues 371,600
Salaries Expense 35,000
Rent Expense 10,000
Utilities Expense 6,400
Totals 906,600 1,017,200
Upon the trial balance and the process of transferring the amounts in the ledger accounts to the tri
balance, two errors were discovered:
a. The debit column in the trial balance was footed incorrectly.
b. The balance in the accounts payable ledger account of P 62,700 was transferred as P 72,600
When the balances of the ledger accounts were recomputed, two more errors were discovered:
a. The Utilities Expense account balance was overstated by P 1,800.
b. The total debits in the Cash account amounted to P 184,600 and the credits totaled P 149,80
Discovered four more errors when postings were retraced from the journal to the ledger:
a. A debit posting to Accounts Receivable in the amount of P 52,000 should have been P 5,200.
b. A debit posting to Accounts Payable for P 46,000 was missing.
c. A credit posting to Revenues in the amount of P 7,600 was missing.
d. A credit of P 31,000 was posted to Accounts Payable rather than P 30,100.
Required: Prepare a corrected trial balance.
VI. Reference
nd
Ballada, W. & Ballada S. (2019). Basic Financial Accounting and ed.).
Reporting
DomDane
(22
Publishers & Made Easy Books

-1 AY 2020-2021

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Republic of the Philippines

DETAILED LEARNING MODULE

Title: Accounting for Service Business

II. Learning Objectives

III. Topics and Key Concepts

Financial Position Financial Performance

Fundamentals of Accounting Partst1Semester

Typical Liability Accounts

Fundamentals of Accounting Partst1Semester

3. Accrued Liabilities. Amounts owed to others for unpaid expenses.

Fundamentals of Accounting Partst1Semester

The Accounting Equation

Assets Liabilities Equity

Debits and Credits – The Double Entry System

Balance Sheet Accounts

Normal Balance Normal Balance

Income Statement Accounts

Normal Balance Normal Balance

Fundamentals of Accounting Partst1Semester

Step 1 – Transaction Analysis

Fundamentals of Accounting Partst1Semester

Date Account Titles and Explanation

Account: Santos, Capital

Step 4 – Preparation of Unadjusted Trial Balance

Fundamentals of Accounting Partst1Semester

Aug 7 Paid cash for medical supplies, P 12,500

Aug 10 Billed patients for professional services performed, P 65,000

Fundamentals of Accounting Partst1Semester

Aug 15 Received telephone bill, P 1,500

Aug 18 Received P 75,000 cash from walk in patients.

Aug 20 Paid salaries, P 25,000 for Aug 1-15 payroll

Aug 22 Received P 40,000 from patients previously billed in transaction.

Aug 28 Duque withdrew cash for personal use, P 25,000

Aug 30 Paid unpaid telephone bill.

Aug 31 Received and paid electric bill, P 15,000

Fundamentals of Accounting Partst1Semester

Cash Notes Payable

381,000 168,000 Unearned Referral Revenue

Medical Supplies Duque, Withdrawal

Prepaid Rent Service Revenue

Fundamentals of Accounting Partst1Semester

IV. Teaching and Learning Materials and Resources

Fundamentals of Accounting Partst1Semester

Problem 2-2 (Recording Business Transactions – Theories)

Problem 2-3 (Elements of Financial Statements)

Fundamentals of Accounting Partst1Semester

Problem 2-5 (Elements of Financial Statements)

Problem 2-6 (Transaction Effects on the Basic Accounting Model)

Problem 2-7 (Transaction Analysis)

Fundamentals of Accounting Partst1Semester

4. Should the account be debited or credited?

Problem 2-8 (Debits and Credits)

Cash Prepaid Insurance Accounts Payable Service Revenues

Mendigorin Maintenance Services completed the following transactions:

Fundamentals of Accounting Partst1Semester

4. Purchased supplies on credit.

Problem 2-9 (Journalizing Transactions)