March 16: Performed services on account, Php75,000

The following are the business transactions of J Studio: ASSETS (Php) LIABILITIES (Php) EQUITY (Php)
Jun is a professional photographer. He decided to establish his own business, J Accounts Receivable Revenue
Studio. 75,000 75,000
Below are business transactions occurred in the month of March:
Jun rendered services to clients. However, he did not any form of cash or
March 1: Mr. Juan made an initial investment to his business amounting to payment. It is considered as accounts receivable on the part of the J Studio.
Php250,000. Payment will be received on a future agreed date by the client. It increases
ASSETS (Php) LIABILITIES (Php) EQUITY (Php) equity because it is part of income. Both asset and equity account
Cash Jun, Capital increased.
250,000 250,000
March 22: Acquired another camera equipment for Php22,000. Paid 10,000 in cash
The effects of business transactions are: and the remaining balance at the end of the month.
1. Financial transaction applies the economic entity concept. Mr. Jun ASSETS (Php) LIABILITIES (Php) EQUITY (Php)
and his business are separate entities. Cash Equipment Accounts Payable
2. J Studio increased its asset and equity because of the investment (10,000) 22,000 12,000
made by Jun.
This transaction has a multiple effect on the accounting equation. Upon
March 3: Purchased camera equipment for cash, Php40,000. payment of the camera equipment was already owned by Jun Studio Serve.
ASSETS (Php) LIABILITIES (Php) EQUITY (Php) However, in this case J Studio partially paid and the remaining balance is
Cash Equipment payable on future agreed date. Upon payment of cash, asset decreases by
(40,000) 40,000 Php11,000 but asset increases upon acquisition of camera equipment. J
Studio did not pay the full amount, unpaid balance increases liability
Both increased and decreased in asset account. J Studio already owns the account because J Studio has an obligation to pay Php12,000.
camera equipment upon purchase in exchange of cash.
March 26: Collected Php75,000 in cash on the service performed on account.
March 9: Bought Php10,000 office supplies on account. ASSETS (Php) LIABILITIES (Php) EQUITY (Php)
ASSETS (Php) LIABILITIES (Php) EQUITY (Php) Cash Accounts
Office Supplies Accounts Payable Receivable
10,000 10,000 75,000 (75,000)

The asset increases upon acquisition of office supplies and liabilities also J Studio received cash of Php75,000 for the services rendered last March 16.
increases because no payment has been made. J Studio incurred a liability. In this case there is no effect in an asset account because both cash and
accounts receivable are asset account. The Accounts Receivable account
March 12: Paid electric bill, Php3,000 that was used in recording the receivable from the client last March 16
ASSETS (Php) LIABILITIES (Php) EQUITY (Php) transaction should be reversed, and no amount should be reported since the
Cash Utilities-electric bill client already paid. The recording of accounts receivable was a set-up to
(3,000) (3,000) monitor J Studio receivables.

The assets and expenses decreased due to consumption of the electricity March 28: Paid supplier of office supplies on account, Php10,000.
and payment of cash. ASSETS (Php) LIABILITIES (Php) EQUITY (Php)
Cash Accounts Payable
March 15: Performed services in cash, Php60,000 10,000 (10,000)
ASSETS (Php) LIABILITIES (Php) EQUITY (Php)
Cash Revenue Last March 9, J Studio purchased an office supplies wherein no payment
60,000 60,000 has been made. In this case, J Studio made a full payment on the office
supplies purchased. The reporting amount of liabilities should be zero
Since Jun performs services, both assets and equity increased. Clients paid because it was already settled. In effect, in this transaction alone, the asset
cash in exchange for services performs. J Studio received cash. These cash increase and liabilities decreased.
will become part of the equity because it is an income derived from services
rendered.
March 30: Paid balance of Php12,000 on camera equipment. 2000 Accounts Payable Use for the debts of the company
ASSETS (Php) LIABILITIES (Php) EQUITY (Php) 2100 Notes Payable Use for promissory notes issued by
Cash Accounts Payable the company
(12,000) (12,000) 2200 Salaries Payable Use for salaries to be paid in the
future
Last March 22 J Studio made an initial payment amounted to Php10,000 for Liabilities
the camera equipment purchased. The camera equipment has a total cost of
Php22,000.
3000 Owner’s, Capital
J Studio still has a balance of Php12,000 (Php22,000-Php1,000). The 4000 Owner’s
reporting amount of liabilities should be zero because it was already settled Withdrawal
the reaming the balance. In, effect, in this transaction alone, both assets 5000 Service Revenue Use for earnings
and liabilities decreased. 6000 Salaries Expense Use for salaries incurred, regardless
of payment
Below is the summary of the J Studio business transactions for the month of March: Capital 6100 Utilities Expense Use for electricity and water
ASSETS (Php) LIABI- EQUITY (Php) expenses incurred
LITIES
DATE (Php)

Cash Accounts Office Equip- Accounts Jun del Revenue Expense-

Recei- Sup- ment Payable Santos, Electricity
vable plies Capital Shown below is an example of a general journal
General Journal
Mar 1 250,000 250,000
Date Account Title and Explanation Ref Debit Credit
3 (40,000) 40,000
9 10,000 10,000
12 (3,000) (3,000)
15 60,000 60,000
16 75,000 75,000
22 (11,000) 22,000 (12,000)
26 75,000 (75,000)
28 10,000 (10,000) To illustrate the recording of transactions in the general journal, let us use
30 (12,000) (12,000) the following transactions as an example:
• September 1, 2015 Mr. Ben Mabait invested PHP500,000 in a restaurant
Total 353,000 0 10,000 62,000 0 250,000 135,000 (3,000) business by opening an
account with SuperBank.
Assets • September 5, 2015 purchased kitchen appliances for his business amounting
to PHP100,000 by issuing a check.
Account code Account Description • September 6, 2015 started his operations a made a sales for that day
*may vary amounting to PHP20,000.
1000 Cash Use for actual cash transactions
1200 Accounts Use for customers who will pay in the
Receivable future
1300 Inventory Use for items held for sale
1400 Prepaid Expenses Use for expenses paid in advance
1500 Supplies Use for items to be used in the future
1600 Office Equipment Use for equipment that are used in
the office
1700 Store Equipment Use for equipment that are used in
the store
1800 Land Use for land used in operations
 General Journal Sales Journal (Sales on Account Journal)
Date Account Title and Explanation Ref Debit Credit
9/1/15 Cash Sales Journal
B Mabait, Capital 500,000 DATE DESCRIPTION REF Charge Debit Credit
500,000
To record investment of Mr. Ben (CUSTOMER NAME) Invoice or Accounts Sales
Mabait Sales Receivable
9/5/15 Kitchen Appliances Cash Invoice No.
To record purchase of kitchen 100,000 100,000
appliances
9/6/15 Cash
Sales 20,000 20,000
To record sales for the day Purchase Journal (Purchases on Account Journal)
The Purchase journal or the Purchases on Account Journal is used to record
Some entries involve only two accounts, one debit and one credit. An entry like these recurring transactions of purchases on account. The source documents for purchase
is considered a simple entry. Some transactions, however, require more than two journal are the invoices from the supplier of the company.
accounts in journalizing. An entry that requires three or more accounts is a
compound entry. All of the transactions in the above examples are simple entries. An Purchase Journal
example of a compound entry is the following: DAT DESCRIPTION REF Charge Debit Credit
E (SUPPLIER’S NAME) Invoice or Purchases Accounts
On September 7, 2015, Mr. Mabait purchased a motorcycle costing PHP80,000. He Sales Payable
pays PHP30,000 cash and agrees to pay the remaining PHP50,000 on account (to be
paid later). The compound entry is as follows:

General Journal
Date Account Title and Explanation Ref Debit Credit
9/7/15 Transportation Equipment Cash There are two kinds of ledgers, namely; the general ledger and the subsidiary
Accounts Payable 30,000 ledgers.
To record purchase of motorcycle by 80,000 50,000 GENERAL LEDGER
paying cash The general ledger (commonly referred by accounting professionals as GL) is a
and the balance on account grouping of all accounts used in the preparation of financial statements. The GL is a
controlling account because it summarizes all the activities that have taken place as

Cash Receipts Journal General Ledger

Cash Receipts Journal Account: Cash Account No.: 1000
DATE DESCRIPTION REF DEBIT CREDIT CREDIT CREDIT Date Item Ref Debit Credit Balance
(PARTICULARS) Cash Sales Account Sundry
Receivable

• The date of the transaction is entered in the date column.

An example of a subsidiary ledger is shown below:
Cash Disbursements Journal (CDJ) Accounts Payable Subsidiary Ledger
The cash disbursements journal is the opposite of the cash receipts journal. It is the
journal where all cash payments are recorded. An example of a cash disbursement Vendor/Supplier: Joy Food Corporation Address: Jose Vendor: 201
journal is shown below: St., Sampaloc, Manila
Date Item Ref Debit Credit Balance
Cash Disbursement Journal
DATE DESCRIPTI REF Check or Credit Debit Debit Debit Credit
ON Voucher Cash Accoun Salarie Suppli Sundry
(PARTICUL Number ts s es
ARS) Payable