Funacc1 Las Q4 Week 1 9 96 Pages

1
ABM – FUNDAMENTALS OF ACCOUNTING 1

Learning Activity Sheets
Quarter 4
WEEK I: PREPARE ADJUSTING ENTIRES.
WEEK 2: COMPLETE THE ACCOUNTING CYCLE.
WEEK 3: DESCRIBE THE NATURE OF TRANSACTIONS IN A
MERCHANDISING BUSINESS.
WEEK 4: RECORD TRANSACTIONS OF A MERCHANDISING
BUSINESS IN THE GENERAL AND SPECIAL JOURNAL.
WEEK 5: POST TRANSACTIONS IN THE GENERAL AND SUBSIDIARY
LEDGERS.
WEEK 6: PREPARE TRIAL BALANCE.
WEEK 7: PREPARE ADJUSTING ENTRIES.
WEEK 8: COMPLETE THE ACCOUNTING CYCLE OF A
MERCHANDISING BSUINESS.
WEEK 9: PREPARE THE STATEMENT OF COST OF GOOD SOLD AND
GROSS PROFIT
Division of Angeles City

FUNDAMENTALS OF ACCOUNTING I
Name: _____________________________ Grade Level: ________________

Section: ___________________________ Date: (Q4: W1) ______________

Background Information for Learners
This lesson focuses on discussing the accounting entries and adjusted trial balance.

ASJUSTING ENTRIES
The length of time in which the life of a business is divided into monthly, quarterly,
semi-annually or annually is what we call accounting period. At the end of each accounting
period, reports are prepared to show the outcome of the operation of the business.
Reports such as income statement, balance sheet should always reflect the income
realized and the expenses incurred the fair measurement of the assets, liabilities and owner’s
equity. And at the end of each accounting period there are several accounts that are needed to
be adjusted.
The accounts that need to be adjusted are:

1. Adjustment for the expiration of the prepayments of expenses
2. Adjustment for the realization of income collected in advance
3. Adjustment for the accrual of expenses
4. Adjustment for the accrual of income
5. Provision for bad debts
6. Provision for depreciation
Adjustment for the Expiration of Prepayment of Expenses
Prepaid expenses are the expenses paid in advance. From the time of payment, the
account is an asset and as it is used by the business it becomes and expense. The adjusting
entry for this may vary from the original journal entry.
There are two methods to be used:
1. Asset Method – under this method the original entry is made charged to an asset
account. The expenses are recorded as an asset example Prepaid Rent, Prepaid
Insurance, Office Supplies, Supplies Unused, etc.
Example:
On November 5 of the current year, A. Pamintuan paid Php30,000 for a three-
month rental of the office space.
Journal Entry:
Nov. 5 Prepaid Rent Php 30,000

Cash Php 30,000
Adjusting Entry:
Dec. 31 Rent Expense Php 20,000

Prepaid Rent Php 20,000
((Php 30,000 / 3 mos.) x 2 mos.)
Analysis
The Php 30,000 which was paid in November 5 is for a three-month rental of
the office space (NOVEMBER, DECEMBER, & JANUARY) Php 10,000 each
month. As of December 31, at the end of the accounting period, only Php 20,000
of rental has been incurred or used for the month of November and December.
Note:
If you are using ASSET method the amount to be recorded in your adjusting
entry is the EXPIRED amount.
2. Expense Method – under this method the original entry is made charged to an
expense account. The expenses are recorded as an expense immediately example
Rent Expense, Insurance Expense, Office Supplies Expense, Supplies Used, etc.
Example:
On November 5 of the current year, A. Pamintuan paid Php30,000 for a three-

month rental of the office space.
Journal Entry:
Nov. 5 Rent Expense Php 30,000

Cash Php 30,000
Adjusting Entry:
Dec. 31 Prepaid Rent Php 10,000

Rent Expense Php 10,000
((Php 30,000 / 3 mos.) x 1 mo.)
Analysis
The Php 30,000 which was paid in November 5 is for a three-month rental of
the office space (NOVEMBER, DECEMBER, & JANUARY) Php 10,000 each
month. As of December 31, at the end of the accounting period, only Php 20,000
of rental has been incurred or used for the month of November and December and
the remaining Php 10,000 is for the month of January of the next accounting
period which is not yet used.
Note:
If you are using EXPENSE method the amount to be recorded in your

adjusting entry is the UNEXPIRED amount.
Adjustment for the realization of income collected in advance or unearned income.
Unearned Income arises when the payment is already received before goods are
delivered or before the service is rendered.
There are two methods to be used:
1. Income Method- in this method the business records the amount collected in the
income account immediately example Rent Income, Service Income etc.
Example:
On November 5 of the current year, the business received Php 30,000 cash from
the tenant of the vacant space of the store.
Journal Entry:
Nov. 5 Cash Php 30,000

Rent Income Php 30,000
Adjusting Entry:
Dec. 31 Rent Income Php 10,000

Unearned Rent Php 10,000
((Php 30,000 / 3 mos.) x 1 mo.)
Analysis
The Php 30,000 which was received in November 5 is for a three-month rental
of the office space of the tenant for the month of NOVEMBER, DECEMBER, &
JANUARY, Php 10,000 each month. November 5 of the accounting period, the
amount received is automatically recorded as an income of the business. At the
end of the year the business must decrease the recorded amount in the income
account, because not all income recorded is for the current accounting period. As
of December 31, the two-month rental income of Php 20,000 was already earned.
Only the Php 10,000 of the rental for the month of January is still unearned.
Note:
If you are using INCOME method the amount to be recorded in your

adjusting entry is the UNEARNED amount.
2. Liability Method- in this method the business records the amount collected in the
liability account immediately example Unearned Rent Income, Unearned Service
Income etc.
Example:
On November 5 of the current year, the business received Php 30,000 cash from
the tenant of the vacant space of the store.
Journal Entry:
Nov. 5 Cash Php 30,000

Unearned Rent Income Php 30,000
Adjusting Entry:
Dec. 31 Unearned Rent Income Php 10,000

((Php 30,000 / 3 mos.) x 1 mo.)
Analysis
The Php 30,000 which was received in November 5 is for a three-month rental
of the office space of the tenant for the month of NOVEMBER, DECEMBER, &
JANUARY, Php 10,000 each month. November 5 of the accounting period, the
amount received is automatically recorded as a liability of the business. At the end
of the year the business must decrease the recorded amount in the liability
account, because not all liability recorded is for the current accounting period. As
of December 31, the two-month rental income of Php 20,000 was already earned.
Only the Php 10,000 of the rental for the month of January is still unearned.
Note:
If you are using LIABILITY method the amount to be recorded in your adjusting
entry is the EARNED amount.
Accrual of Expenses
Accrued Expense – are the expenses that are already incurred but not yet paid or
recorded. At the end of the accounting period, the income statement should be reflected such
expense and the balance sheet should reflect a liability account. Examples of accrued
expense: Accrued Salaries, Accrued Utility, etc.
Example:
Office employees are paid every two weeks. On December 31, five days’ salaries
of an office employee for Php 300 per day have accrued.
Adjusting Entry:
Dec. 31 Salaries Expense Php 1,500

Accrued Salaries Php 1,500
(Php 3000 x 5 days not yet paid)
Accrual of Income
Accrued Income – arises when the goods have been delivered or the services have
been rendered but no amounts of payment have been collected or there is no payment
collected or recorded. To avoid understatement of income and assets, an adjusting entry is
needed at the end of the accounting period. Examples of accrued income: Accrued Rent
Income, Accrued Interest Income, etc.
Example:
A tenant, who occupies the right side of the shop space, is two months in arrears
as of the balance sheet date. The monthly rental is Php 2,500 per month.
Adjusting Entry:
Dec. 31 Accrued Rent Income Php 5,000

(Php 2,500 x 2 months)
Provision of Bad Debts
Businesses extend credits to get more customers and to sell more goods. Not all
credits are collectible. There are certain percentage of this receivables are not collected, for
the reason that the business should provide for such losses for non-collectible of credits. The
losses from uncollectible accounts are what we call bad debts.
Bad Debt is a nominal account which must be shown in the income statement at the
end of the accounting period.
The entry to adjust the bad debts is:
Bad Debts Php XXX

Allowance for Bad Debts Php XXX
There are several methods of estimating the losses from the bad debts:
1. Increasing the accumulated allowance for bad debts by a certain

percentage of the account receivable.
2. Increasing the accumulated allowance for bad debts to a certain percentage

of accounts receivable.
Example:
The following accounts are shown in the pre-adjusted trial balance of Mr. Reyes
as of December 31, 2020.
DEBIT CREDIT
Accounts Receivable Php 7,000
Allowance for Bad Debts Php 500
1. Increasing the accumulated allowance for bad debts by a certain percentage of

the account receivable.
What is the adjusting entry to increase the allowance for bad debts by 10% of
the accounts receivable?
Computation:
Bad Debts estimate = Php 7,000 x .10 = Php 700
Adjusting Entry:
Bad Debts Php 700

Balance Sheet Presentation:

Less: Allowance for Bad Debts 1,200
Net Realizable Value Php 5,800
Example:
The following accounts are shown in the pre-adjusted trial balance of Mr. Reyes
as of December 31, 2020.
DEBIT CREDIT
2. Increasing the accumulated allowance for bad debts to a certain percentage of

accounts receivable.
What is the adjusting entry to increase the allowance for bad debts to 10% of
the accounts receivable?
Computation:
Bad Debts estimate = Php 7,000 x .10 = Php 700

Less: Bad Debts Estimate 700
Increase in Allowance for Bad Debts Php 200
Adjusting Entry:
Bad Debts Php 200


Less: Allowance for Bad Debts 700
Net Realizable Value Php 6,300
Provision of Depreciation
Assets that are fixed in nature and they are used by the business operation and are not
intended for sale. The values of these assets are decrease except land. Land only decreases as
time passes by due to wear and tear from operations and inadequacy and obsolescence.
The cost of the fixed asset is allocated to the number of its useful life. Depreciation is
the cost of asset which is already used or consumed.
There are different methods used in depreciating an asset. However, this module will
focus on the simplest form, the straight line method of depreciation.
D = (C-S) /n
DEPRECIATION = (ORIGINAL COST – SALVAGE VALUE) / ESTIMATED

USEFUL LIFE
Example 1:
A service truck was purchased for Php 250,000. It is estimated that it will last 10
years after which it shall have a value of Php 5,000.
D = (C – S) / n
D = (Php 250,000 – Php 5,000) / 10 years
D = Php 200,000 / 10 years
D = Php 20,000 / year
Adjusting Entry:
Depreciation – Service Truck Php 20,000

Accumulated Depreciation – Service Truck Php 20,000
Service Truck Php 250,000

Less: Accumulated Depreciation 20,000
Php 230,000
Example 2:
The owner of the business purchased a service truck last April 9, 2020 worth Php
250,000. It is estimated that it will last 10 years after which it shall have a value of Php 5,000.
D = {[(C – S) / n ] / 12 mos. x no. of mos. used}

D = {[(Php 250,000 – Php 5,000) / 10 years] / 12 mos. x 9 mos.}
D = {[Php 200,000 / 10 years] / 12 mos. x 9 mos.}
D = (Php 20,000 / 12 mos.) x 9 mos.
D = Php 1,666.67 x 9 mos.
D = Php 15,000 for 9 mos.
Note: 9 months if from April 9, 2020 up to December 31, 2020.

Adjusting Entry:
Depreciation – Service Truck Php 15,000

Accumulated Depreciation – Service Truck Php 15,000
Service Truck Php 250,000

Less: Accumulated Depreciation 15,000
Php 235,000
Illustration
CLARING REPAIR SHOP
TRIAL BALANCE
DECEMBER 31, 2020
DEBIT CREDIT
CASH Php 900
ACCOUNTS RECEIVABLE – S. MARIANO 1,200
REPAIR SUPPLIES 1,500
REPAIR TOOLS 1,200
FURNITURE AND FIXTURES 6,500
SERVICE TRUCK 20,000
NOTES PAYABLE
CLARING, CAPITAL Php 3,250
CLARING, DRAWING 25,200
750
SERVICE INCOME
ADVERTIING 5,900
250
SALARIES AND WAGES 900
UTILITY EXPENSE 150
RENT EXPENSE 1,000
Php 34,350 Php 34,350
On December 31, the end of the accounting period, the following data were taken:
1. An actual count of repair supplies showed a balance of Php 850.

2. Repair tools are depreciated at 10% per annum.
3. Furniture and fixtures are estimated to have a useful life of 5 years while service truck
has a useful life of 10 years. Both assets were bought on September 1 of the current
year.
4. A 10% interest has accrued on the note payable.
5. Of the income received, Php 900 is applicable to the next accounting period.
6. Accrual of expenses: salaries and wages Php 250, rent Php 500.
7. The balance of the advertising expense account represents payment for five months.
Paid on September 1 of the current year.
Reqiired:
Prepare the Adjusting Entries and the Adjusted Trial Balance.

Adjusting Entries:
1. Repair supplies used Php 650

Repair supplies Php 650
(Php 1,500 – Php 850)
2. Depreciation – repair tools 120

Accumulated Depreciation – repair tools 120
(Php 1,200 x .10)
3. Depreciation – furniture and fixtures 433

Accumulated Depreciation – furniture and fixtures 433
[(Php 6,500 / 5yrs) / 12 mos. x 4 mos]
Depreciation – service truck 667

Accumulated Depreciation – service truck 667
[(Php 20,000 / 10 yrs) / 12 mos. x 4 mos]
4. Interest expense 325

Accrued Interest expense 325
(Php 3,250 x .10)
5. Service Income 900

Unearned Service Income 900
6. Salaries and Wages 250

Accrued Salaries and Wages 250
Rent Expense 500

Accrued Rent Expense 500
7. Prepaid Advertising 50
Advertising 50
[(Php 250 / 5 mos.) x 4 mos. expired]
Adjusted Trial Balance:
STEP I: Rewrite the unadjusted trial balance and add the adjustments.
CLARING REPAIR SHOP

TRIAL BALANCE
DECEMBER 31, 2020
DEBIT (+ or -) CREDIT (+ or -)
CASH Php 900
ACCOUNTS RECEIVABLE – S. MARIANO 1,200
REPAIR SUPPLIES
REPAIR TOOLS 1,500 Php (650)
SERVICE TRUCK 6,500
NOTES PAYABLE
CLARING, CAPITAL 20,000
CLARING, DRAWING Php 3,250
SERVICE INCOME 25,200
ADVERTIING 750
SALARIES AND WAGES 5,900 Php (900)
UTILITY EXPENSE 250
RENT EXPENSE (50)
900 250
Adjustments: 150
Repair Supplied Used 1,000
Depreciation – Repair Tools 500
Accumulated Depreciation – Repair
650
Tools
120
Depreciation – Furniture and Fixtures
Accumulated Depreciation – Furniture 120
and Fixtures
Depreciation – Service Truck 433
Accumulated Depreciation – Service
Truck
433
Interest expense
Accrued Interest Expense 667
Unearned Service Income
Accrued Salaries Expense 667
Accrued Rent Expense
325
Prepaid Advertising
325
900
250
500
50
Php 36,695 Php 3,245 Php 34,350 Php (900)
Php 33,450 Php 33,450
STEP II: Re-arrange the account titles according to their classification and adjust the
amount as to increase or decrease.
CLARING REPAIR SHOP

ADJUSTED TRIAL BALANCE
DECEMBER 31, 2020
DEBIT CREDIT
CASH Php 900
ACCOUNTS RECEIVABLE – S MARIANO 1,200
PREPAID ADVERTISING 50
REPAIR SUPPLIES 850
REPAIR TOOLS 1,200
ACCUMULATED DEPRECIAITON – REPAIR TOOLS
FURNITURE AND FIXTURES Php 120
6,500
ACCUMULATED DEPRECIAITON - FURNITURE AND FIXTURES
SERVICE TRUCK 433
ACCUMULATED DEPRECAITION - SERVICE TRUCK 20,000
NOTES PAYABLE
UNEARNED SERVICE INCOME 667
ACCRUED INTEREST EXPENSE 3,250
ACCRUED SALARIES EXPENSE 900
ACCRUED RENT EXPENSE
CLARING, CAPITAL 325
CLARING, DRAWING 250
SERVICE INCOME 500
ADVERTIIING 750 25,200
SALARIES AND WAGES
UTILITY EXPENSE 5,000
200
RENT EXPENSE
1,150
REPAIR SUPPLIES USED
150
DEPRECIAITON – REPAIR TOOLS
1,500
DEPRECIAITON – FURNITURE
650
DEPRECAITION - SERVICE TRUCK
120
INTEREST EXPENSE
433
667
325
Php 36,645 Php 36,645
Learning Competency
 Prepare Adjusting Entries - ABM_FABM11 – IV a - d – 33
Activity I: FILL IN THE BLANK!
Direction: Give the year-end adjusting entry required by each of the following

transactions.
1. One month interest on the mortgage, Php 4,000 has accrued.
2. Accrued drivers’ wages at the end of the year is Php 5,000
3. A tenant, occupying a space of the building agreed beginning on November 1

to pay Php 5,500 per month , and on that date he paid six month rent in
advance. The amount paid was credited to the Unearned Rent account.
4. The company owns and occupies a building that was completed and occupied
for the first time on April 1 of the current year. The building cost Php 200,000,
has an estimated useful life of 40 years and is not expected to have nay
salvage value at the end of its useful life.
5. Four employees earn a total of Php 1,000 per day for a five-day week that
begins on Monday and ends on Friday. They are paid for the week ended
assuming December 28 is Friday.
6. The balance of the Repair Supplies account as of January 1 is Php 1,200, Php
3,500 of repair supplies are purchased during the year, and a year-end
inventory showed Php 1,100 of supplies used.
7. Three months’ property taxes, estimated at Php 1,500 have accrued but are
unrecorded at the end of the accounting period.
8. Depreciation on delivery equipment was estimated at Php 3,500.
9. One month interest on a Php 10,000, 10%, 60-day note was collected.
10. The business has an account receivable of Php 10,500 in which 10% is proved
uncollectible.
Activity 2: ADJUST ME!
Direction: Prepare the necessary adjusting entries of the given problem. Use the space
provided.
a. URSULA CINEMA
TRIAL BALANCE
DECEMBER 31, 2020
DEBIT CREDIT
CASH Php250,000
PREPAID ADVERTISING 52,000
PREPAID FILM RENTAL 200,000
LAND 300,000
BUIDING 1,000,000
ACCUMULATED DEPRECIATION-BUILDING
PROJECTION EQUIPMENT Php50,000
350,000
ACCUMULATED DEPRECIATION –PROJECTION EQUIPMENT
NOTES PAYABLE 35,000
ACCOUNTS PAYABLE
URSULA, CAPITAL 20,000
URSULA, DRAWINGS 30,000
REVENUE FROM ADMISSION 867,000
SALARIES EXPENSE 20,000
POWER AND LIGHT 1,500,000
195,000
135,000
Php 2,502,000 Php 2,502,000
Adjustment Data:
1. Advertising expense for the period, Php 30,000.
2. Rental expense for the period Php 50,000.
3. Depreciation expense on building Php 20,000; on projection equipment
Php 15,000.
4. Accrued interest on notes payable Php 2,000.
5. Salaries not yet paid to employees, Php 15,000.
GENERAL JOURNAL Page: _____
DATE PARTICULARS F DEBIT CREDIT
b. CANADA STORAGE
TRIAL BALANCE
DECEMBER 31, 2020
DEBIT CREDIT
CASH Php2,330
ACCOUNTS RECEIVABLE 970
PREPAID INSURANCE 1,450
OFFICE SUPPLIES 410
OFFICE EQUIPMENT 1,780
ACCUMULATED DEPRECIATION-OFFICE EQUIPMENT
TRUCKS Php450
ACCUMULATED DEPRECIATION-TRUCKS 15,000
LAND
ACCOUNTS PAYABLE 4,550
20,000
UNEARNED STORAGE FEES
MORTGAGE PAYABLE 1,050
CANADA, CAPITAL 750
CANADA, DRAWINGS 15,000
STORAGE INCOME 44,500
OFFICE SALARIES EXPENSE 2,000
DRIVER’S WAGE EXPENSE 40,750
GAS, OIL, AND REPAIRS 5,500
10,600
3,010
Php 108,550 Php 108,550
Adjustment Data:
1. It is estimated that 10% of the accounts receivable is proven to be
uncollectible.
2. An examination of insurance policies showed that Php 650 of
insurance expired.
3. Actual count of office supplies showed a balance of Php 110.
4. Fixes assets are 15% depreciated annually.
5. Storage fees earned amounted to Php 450.
6. Accrued office salaries Php 1,500; truck drivers’ wage Php 4,200.

Activity 3: TRY ME!
Direction: Using the unadjusted trial balance and your answer in adjusting entries in
activity no. 2, prepare the ADJUSTED TRIAL BALANCE of each problem. Use the
space provided.
a. URSULA CINEMA
_________________________________
_________________________________
ACCOUNT TITLE DEBIT CREDIT
b. CANADA STORAGE
_________________________________
_________________________________

Name: _____________________________ Grade Level: ________________

Section: ___________________________ Date: (Q4: W2) ______________

This lesson focuses on discussing the financial statements, closing-entries, post-
closing trial balance, and reversing entries.

FINANCIAL STATEMENTS
After adjusting the accounts, financial statements are prepared. There are two basic
accounting reports: Income Statement which contains the income and expenses accounts that
will show the business operation or the performance of the business. The other one is the
Balance Sheet that contains the assets, liabilities and owner’s equity if of the business it
shows the financial condition of the business.
Income Statement or Statement of Financial Performance has two forms: the multiple
step form and the single step form. The single step is commonly used by service concern. In
which all expenses incurred are deducted from the income earned in order to get the net
income.
INCOME STATEMENT – SINGLE STEP FORM (NET LOSS): ILLUSTRATION
CLARING REPAIR SHOP

INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2020
SERVICE INCOME Php 5,000
Less: ADVERTIIING Php 200

SALARIES AND WAGES 1,150
UTILITY EXPENSE 150
RENT EXPENSE 1,500
REPAIR SUPPLIES USED 650
DEPRECIAITON – REPAIR TOOLS 120
DEPRECIAITON – FURNITURE 433
DEPRECAITION - SERVICE TRUCK 667
INTEREST EXPENSE 325 5,194
NET LOSS (Php 194)
INCOME STATEMENT – SINGLE STEP FORM (NET INCOME): ILLUSTRATION
CLARING REPAIR SHOP

INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2020
SERVICE INCOME Php 5,900
Less: ADVERTIIING Php 200

SALARIES AND WAGES 1,150
UTILITY EXPENSE 150
RENT EXPENSE 1,500
REPAIR SUPPLIES USED 650
DEPRECIAITON – REPAIR TOOLS 120
DEPRECIAITON – FURNITURE 433
DEPRECAITION - SERVICE TRUCK 667
INTEREST EXPENSE 325 5,194
NET INCOME Php 706
Balance Sheet has also two forms: the Report Form and Account Form. The Report
Form, the assets, liabilities and owner’s equity sections are in vertical order. While an
Account Form, the assets are on the left side and the liabilities and owner’s equity are on the
right side like the accounting equation.
BALANCE STATEMENT – ACCOUNT FORM (LOSS): ILLUSTRATION
CLARING REPAIR SHOP

BALANCE SHEET
AS OF DECEMBER 31, 2020
ASSETS LIABILITIES
CURRENT:
CASH Php 900 NOTES PAYABLE Php 3,250
ACCOUNTS RECEIVABLE- 1,200 ACCRUED INTEREST 325
S. MARIANO
REPAIR SUPPLIES 850 ACCRUED SALARIES 250
PREPAID ADVERTISING 50 AND WAGES
TOTAL CURRENT ASSETS Php 3,000 ACCRUED RENT EXPENSE 500
UNEARNED SERVICE 900
NON-CURRENT: INCOME _________
REPAIR TOOLS Php 1,200 TOTLA LIABILITIES Php 5,225
LESS: ACC.
DEPRECIAITON 120 Php 1,080
FURNITURE & Php 1,200 OWNER’S EQUITY
FIXTURE CLARING,
LESS: ACC. CAPITAL Php 25,200
DEPRECIAITON 433 Php 6,067 LESS: CLARING
SERVICE TRUCK Php 20,000 DRAWINGS 750,
LESS: ACC. NET CAPITAL Php 24,450
DEPRECIAITON 667 Php19,334 LESS:NET LOSS 194 Php24,256
TOTAL NON-CURRENT Php 26,481
ASSET
TOTAL ASSETS Php 29,481 TOTAL LIABILITIES Php 29,481

& OWNER’S EQUITY
BALANCE STATEMENT – ACCOUNT FORM (LOSS): ILLUSTRATION

CLARING REPAIR SHOP
BALANCE SHEET
ASSETS
CURRENT: PHP 900
CASH 1,200
ACCOUNTS RECEIVABLE-S. MARIAO 850
REPAIR SUPPLIES 50
PREPAID ADVERTISING PHP 3,000
TOTAL CURRENT ASSETS
NON-CURRENT:
RAPAIR TOOLS PHP 1,200
LESS: ACCUMULATED DEPRECIATION 120 PHP 1,080
FURNITURE AND FIXTURES PHP 6,500
LESS: ACCUMULATED DEPRECIATION 433
SERVICE TRUCK PHP 20,000 6,067
LESS: ACCUMULATED DEPRECIATION 667
TOTAL NON-CURRENT ASSETS 19,334 26,481
TOTAL ASSETS PHP 29,481
LIABILITIES
NOTES PAYALE PHP 3,250
ACCRUED INTEREST EXPENSE 325
ACCRUED SALARIES AND WAGES 250
ACCRUED RENT EXPENSE 500
UNEARNED SERVICE INCOME 900
TOTAL LIABILITIES PHP 5,225
OWNER’S EQUITY
CLARING, CAPITAL PHP 25,200
LESS: CLARING, DRAWINGS 750
NET CAPITAL PHP 24,450
LESS: NET LOSS 194
TOTAL OWNER’S EQUITY 24,250
TOTAL LIABILITIES & OWNER’S EQUITY PHP 29,481
BALANCE STATEMENT – ACCOUNT FORM (INCOME): ILLUSTRATION

CLARING REPAIR SHOP
BALANCE SHEET
ASSETS LIABILITIES
CURRENT:
CASH Php 900 NOTES PAYABLE Php 3,250
ACCOUNTS RECEIVABLE- 1,200 ACCRUED INTEREST 325
S. MARIANO
REPAIR SUPPLIES 850 ACCRUED SALARIES 250
PREPAID ADVERTISING 50 AND WAGES
TOTAL CURRENT ASSETS Php 3,000 ACCRUED RENT EXPENSE 500
NON-CURRENT: _________
REPAIR TOOLS Php 1,200 TOTLA LIABILITIES Php 4,325
LESS: ACC.
DEPRECIAITON 120 Php 1,080
FURNITURE & Php 1,200 OWNER’S EQUITY
FIXTURE CLARING,
LESS: ACC. CAPITAL Php 25,200
DEPRECIAITON 433 Php 6,067 LESS: CLARING
SERVICE TRUCK Php 20,000 DRAWINGS 750,
LESS: ACC. NET CAPITAL Php 24,450
DEPRECIAITON 667 Php19,334 LESS:NET INCOME 706 Php25,156
TOTAL NON-CURRENT Php 26,481
ASSET
TOTAL ASSETS Php 29,481 TOTAL LIABILITIES Php 29,481
& OWNER’S EQUITY
BALANCE STATEMENT – ACCOUNT FORM (INCOME): ILLUSTRATION
CLARING REPAIR SHOP

BALANCE SHEET
ASSETS
CURRENT: PHP 900
CASH 1,200
ACCOUNTS RECEIVABLE-S. MARIAO 850
REPAIR SUPPLIES 50
PREPAID ADVERTISING PHP 3,000
TOTAL CURRENT ASSETS
NON-CURRENT:
RAPAIR TOOLS PHP 1,200
LESS: ACCUMULATED DEPRECIATION 120 PHP 1,080
FURNITURE AND FIXTURES PHP 6,500
LESS: ACCUMULATED DEPRECIATION 433 6,067
SERVICE TRUCK PHP 20,000
LESS: ACCUMULATED DEPRECIATION 667 19,334
TOTAL NON-CURRENT ASSETS 26,481
LIABILITIES
NOTES PAYALE PHP 3,250
ACCRUED SALARIES AND WAGES 250
TOTAL LIABILITIES PHP 5,225
OWNER’S EQUITY
CLARING, CAPITAL
LESS: CLARING, DRAWINGS PHP 25,200
NET CAPITAL 750
LESS: NET LOSS PHP 24,450
TOTAL OWNER’S EQUITY 194 24,250
TOTAL LIABILITIES & OWNER’S EQUITY PHP 29,481
CLOSING ENTRIES
After the income statement has been prepared, the nominal or temporary accounts
have served its purpose that they have been to measure and show the nature of the financial
condition.
The income and expense accounts are not accumulated. They are computed for each
accounting period. Therefore these accounts should be closed.
To close the nominal or temporary accounts:

1. Debit the Income Account and credit the Income and Expense
Summary account.
2. Credit the Expense Accounts and debit the Income and Expense
Summary account.
3. Get the difference of the Income and Expense Summary
account. The difference should be closed to the capital account.
4. If there is a drawing account, the difference of the Income and
Expense Summary account should be closed to this account, the drawing
account then is closed to the capital account.
Illustration: (INCOME)
1. Service Income
Php 5,900
Income and Expense Summary Php 5,900
To close the income account to the
Income and expense summary account
7. Income and Expense Summary 5,194

Advertising 200
Salaries and Wages 1,150
Utilities Expense 150
Rent Expense 1,500
Repair Supplies Used PHP 650
Depreciation – Repair Tools 120
Depreciation – Furniture and Fixtures 433
Depreciation – Service Truck 667
Interest Expense 325
To close the expense account to the
Income and expense summary account.
8. Income and Expense Summary Php 706

Claring, Drawings 706
To close the income and expense summary
Account to drawing account.
9. Claring, Capital 44
Claring, Drawings 44
To close the drawing account to capital account.
POST-CLOSING TRIAL BALANCE
To see the accounts in the ledger are in their correct balance before the transactions of
the next accounting period are posted, a post-closing trial balance should be prepared.
CLARING REPAIR SHOP

DECEMBER 31, 2020
DEBIT (+,-) CREDIT (+,-)

CASH Php 900
PREPAID ADVERTISING
REPAIR SUPPLIES 50
REPAIR TOOLS 850
ACCUMULATED DEPRECIAITON – REPAIR TOOLS 1,200
FURNITURE AND FIXTURES
ACCUMULATED DEPRECIAITON - FURNITURE Php 120
AND FIXTURES 6,500
SERVICE TRUCK
ACCUMULATED DEPRECAITION - SERVICE 433
TRUCK
NOTES PAYABLE 20,000
ACCRUED SALARIES EXPENSE
ACCRUED RENT EXPENSE
3,250
CLARING, CAPITAL
325
CLARING, DRAWING
250
SERVICE INCOME
500
ADVERTIIING
25,200
SALARIES AND WAGES (45)
750
UTILITY EXPENSE
(750) 5,900
RENT EXPENSE
200 (5,900)
REPAIR SUPPLIES USED
DEPRECIAITON – REPAIR TOOLS 1,150 (200)
DEPRECIAITON – FURNITURE 150 (1,150)
DEPRECAITION - SERVICE TRUCK 1,500 (150)
INTEREST EXPENSE 650 (1,500)
120 (650)
433 (120)
667 (433)
325 (667)
(325)
Php 36,645 (5,945) Php 36,645 (5,945)
CLARING REPAIR SHOP

DECEMBER 31, 2020
DEBIT CREDIT
CASH Php 900
PREPAID ADVERTISING 50
REPAIR SUPPLIES 850
REPAIR TOOLS 1,200
ACCUMULATED DEPRECIAITON – REPAIR TOOLS
Php 120
ACCUMULATED DEPRECIAITON - FURNITURE AND FIXTURES
SERVICE TRUCK 433
ACCUMULATED DEPRECAITION - SERVICE TRUCK 20,000
NOTES PAYABLE
ACCRUED SALARIES EXPENSE 3,250
CLARING, CAPITAL 250
500
25,155
Php 30,700 Php 30,700
REVERSING ENTRIES
Reversing entries are the entries done at the beginning of the next accounting period
to reverse the adjusting entries done in the previous accounting period.
The following are the adjusting entries that are needed to be reversed at the beginning
of the next accounting period.
1. Accrual of Expenses
2. Accrual of Income
3. Prepayment of Expenses (Expense Method)
4. Pre-collection of Income (Income Method)
Adjusting Entries:
1. ASSET METHOD
Repair supplies used Php 650

Repair supplies Php 650
(Php 1,500 – Php 850)
2. PROVISION FOR DEPRECIATION
Depreciation – repair tools 120

Accumulated Depreciation – repair tools 120
(Php 1,200 x .10)
3. PROVISION FOR DEPRECIATION
Depreciation – furniture and fixtures 433

Accumulated Depreciation – furniture and fixtures 433
[(Php 6,500 / 5yrs) / 12 mos. x 4 mos]
Depreciation – service truck 667

Accumulated Depreciation – service truck 667
[(Php 20,000 / 10 yrs) / 12 mos. x 4 mos]
4. ACCRUAL OF EXPENSES
Interest expense 325

(Php 3,250 x .10)
5. PRE-COLLECTION OF INCOME (INCOME METHOD)
Service Income 900

6. ACCRUAL EXPENSES
Salaries and Wages 250

Rent Expense 500

7. PREPAYMENT OF EXPENSES (EXPENSE METHOD)
Prepaid Advertising 50
Advertising 50
[(Php 250 / 5 mos.) x 4 mos. expired]
Reversing Entries:
1. ACCRUAL OF EXPENSES

Interest expense 325
2. PRE-COLLECTION OF INCOME (INCOME METHOD)

Service Income 900
3. ACCRUAL EXPENSES

Salaries and Wages 250

Rent Expense 500
4. PREPAYMENT OF EXPENSES (EXPENSE METHOD)
Advertising 50
Prepaid Advertising 50
Learning Competency
 Complete the Accounting Cycle - ABM_FABM11 – IV a - d – 34
Activity I: STATE IT!
Direction: Using your answer on the Adjusted Trial Balance of URSULA CINEMA and
CANADA STORAGE prepare the INCOME STATEMENT (Single Step) and the
BALANCE SHEET (Report Form).
URSULA CINEMA
___________________________________________
___________________________________________
CANADA STORAGE
___________________________________________
___________________________________________
Activity 2: CLOSE UP!
Direction: Using your answer on the Financial Statement of Ursula Cinema and Canada
Storage. Prepare the Closing Entries of the two businesses.
CLOSING ENTRIES URSULA CINEMA

CLOSING ENTRIES CANADA STORAGE

Activity 3: POST ME UP!
Direction: Using your answer on the Adjusted Trial Balance and Closing Entries of
Ursula Cinema and Canada Storage, prepare the Post-Closing Trial Balance of the two
businesses.
URSULA CINEMA
___________________________________________
___________________________________________
CANADA STORAGE
___________________________________________
___________________________________________
Activity 4: REVERSE IT!
Direction: Using your answer on the adjusting entries of Ursula Cinema and Canada
Storage. Prepare the Reversing Entries of the two businesses.
REVERSING ENTRIES URSULA CINEMA

REVERSING ENTRIES CANADA STORAGE

ANSWER KEY:
Reference:
Arganda, Amelia M., Atis, Teresa Cardenas. 2011. Accounting Principles Fourth Edition:

Mandaluyung Philippines: National Bookstore.
Tugas, Florencz C., Salendrez, Herminigilda E., Rabo, Joy S. 2016. Fundamentals of

Accountancy, Business and Managemnt 1: Quezon City Philippines: Vibal Group, Inc.

Prepared by:

MARY ROSE G. VERGARA
Senior High School Teacher II
Angeles City National High School – SHS
Name: _____________________________ Grade Level: ________________

Section: ___________________________ Date: (Q4: W3) ______________

This lesson focuses on describing the nature of transactions in a merchandising

business.
DEFINITION AND NATURE OF MERCHANDISING BUSINESS
Merchandising is one of the three forms of business organization according to

activities. Merchandising business is a business that engages in the buying and selling of
goods or merchandise.
Its normal operation is to buy merchandise or goods, selling merchandise, billing

customers, and collecting customer’s accounts.
Merchandise is referred to as the item that was bought by the business for the purpose
of reselling it. Merchandise that are still unsold at the end of the accounting period is known
and merchandising inventory, end which is known to as stock; and it is classified as current
asset. Merchandise inventory, beginning refers to the merchandise that remains unsold from
previous accounting period and is expected to be sold the current period. Cost of goods sold
or cost of sales is the amount of merchandise sold by the business for a given period of time.
It is computed by adding the net cost of purchase to the beginning inventory to get the cost of
goods available for sale from which the ending inventory is deducted from.
Merchandise Inventory, Beginning Php XXX

Add: Net Cost of Purhcase XXX
Cost of Goods Available for sale Php XXX
Less: Merchandise Inventory, Ending XXX
Cost of Goods Sold Php XXX
OPERATING CYCLE OF MERCHANDISING BUSINESS
BUY
MERHCANDISE
COLLECT
SELL
CUSTOMERS
ACCOUNT MERHCANDISE
BILL
CUSTOMERS
TRANSACTIONS IN A MERCHANDISING BUSINESS
The transactions for a service type of business are similar to the merchandising
business. Service and merchandising generates revenue and incur expenses, collect bills and
pay obligations.
The following are the transactions for a merchandising business:

1) Purchase of merchandise
2) Purchase returns and allowances
3) Payment of freight
4) Partial payment of account with supplier
5) Full payment of account with supplier
6) Sale of merchandise
7) Sales return and allowances
8) Partial collections of customer account
9) Full collection of customer account
10) Purchase supplies
11) Purchase property, plant and equipment
12) Incurrence of expenses
13) Payment of expenses
14) Owner’s investment of merchandise
15) Owner’s withdrawal of merchandise
EFFECTS OF EACH TRANSACTION IN THE ACCOUNTING EQUATION
 SELLER’S BOOK
OWNER’S
TRANSACTIONS ASSETS LIABILITIES
EQUITY
Sale of merchandise cash basis + +
Sale of merchandise on account + +
Sale of merchandise with down payment + +
Sales returns and allowances (cash basis) - -
Sales returns and allowances (on account) - -
Sales returns and allowances (with down Sale) - -
Partial collection of account with supplier +/-
Full collection of account beyond discount period
+/-
Full collection of account within the discount period.

+/- -
 BUYER’S BOOK
OWNER’S
EQUITY
Purchase of merchandise on cash basis - -
Purchase of merchandise on account + -
Purchase of merchandise with down payment - + -
Purchase returns and allowances (cash basis) + +
Purchase returns and allowances (on account) - +
Purchase returns and allowances (with down
- +
payment)
Partial payment of account with supplier - -
Full payment of account beyond discount period - -
Full payment of account within the discount period. - - +
 REMAINING TRANSACTIONS IN MERCHANDISING BUSINESS
OWNER’S
EQUITY
Payment of freight on merchandise purchased - -
Purchase of freight on merchandise sold - -
Purchase of supplies on cash basis +/-
Returns on supplies purchased +/-
Purchase supplies on account + +
Return on supplies purchased - -
Purchase of equipment on cash basis +/-
Allowance granted in equipment purchased +/-
Purchase of equipment with down payment +/-
Allowance granted on equipment purchased - -

Incurrence of expenses + -
Payment of expenses - -
Payment of expenses already recorded in no. 12 - -
Initial investment of merchandise by owner + +
Initial investment of merchandise with liability + + +
Additional investment of merchandise by owner +/-
Owner’s withdrawal of merchandise +/-
Learning Competency
Describe the nature of transaction in a merchandising business

- ABM_FABM11 – IV e - j – 35
Activity 1: CYCLE!
Direction: Complete the diagram below to show the Operating Cycle of a
Merchandising Business.
____________
____________ ____________
__________
__
Activity 2: FILL IT UP!
Direction: Complete the given table below to show the analysis of transactions of a
merchandising business in the following book. Put (+) if it is an increase, (-) if it is
decrease and (0) if there is no effect at all.
BUYER’S BOOK
OWNER’S
EQUITY
1. Purchase of merchandise on cash
basis
2. Purchase of merchandise on account
3. Purchase of merchandise with down
payment
4. Purchase returns and allowances
(cash basis)
5. Purchase returns and allowances (on
account)
6. Purchase returns and allowances
(with down payment)
7. Partial payment of account with
supplier
8. Full payment of account beyond
discount period
9. Full payment of account within the
discount period.
SELLER’S BOOK
OWNER’S
EQUITY
1. Sale of merchandise cash basis
2. Sale of merchandise on account
3. Sale of merchandise with down
payment
4. Sales returns and allowances (cash
basis)
5. Sales returns and allowances (on
account)
6. Sales returns and allowances (with
down Sale)
7. Partial collection of account with
supplier
8. Full collection of account beyond
discount period
9. Full collection of account within the
discount period.
REMAINING TRANSACTIONS IN MERCHANDISING BUSINESS
OWNER’S
EQUITY
1. Payment of freight on merchandise purchased
2. Purchase of freight on merchandise
sold
3. Purchase of supplies on cash basis
4. Returns on supplies purchased
5. Purchase supplies on account
6. Return on supplies purchased
7. Purchase of equipment on cash basis
8. Allowance granted in equipment
purchased
9. Purchase of equipment with down
payment
10. Allowance granted on equipment
purchased
11. Incurrence of expenses
12. Payment of expenses
13. Payment of expenses already
recorded in no. 12
14. Initial investment of merchandise by
owner
15. Initial investment of merchandise
with liability
16. Additional investment of
merchandise by owner
17. Owner’s withdrawal of merchandise
Name: _____________________________ Grade Level: ________________

Section: ___________________________ Date: (Q4: W4) ______________
This lesson focuses on journalizing business transactions in a merchandising business.
JOURNALIZING
The steps of accountings will start with journalizing. It is the process of recording
business transactions in a journal.
A journal is a book of accounts where all business transactions are recorded for the
first time. It is also called the book of original entry. There were two kinds of journal the
general journal and the special journal.
Journalizing is the second step in accounting, recording business transactions in the

general journal.
Procedure in Journalizing:
A. Under the date column:

- At the top of the first column write the year in small figures.
- On the first line of the first column write the month of the transaction. The
year and the month is not repeated every transaction except on the new page.
- Each day of the transaction it should be written in the right sub-column of the
date column. The date of the transaction occurring on the same day is
repeated.
B. Under the particulars column

- The account debited is written first at the left margin of the particulars.
- The account credited is written on the following line, indented about one-half
inch from the left margin.
- After the credit amount the explanation should be written on the next line,
indented one inch from the left margin. Explanation should be short and
sufficient to explain the entry.
C. Under the folio or reference column

- The folio or the reference number is used to indicate the page number of the
ledger in which the entry is transferred.
D. Under the debit column

- The amount debited is written on the debit column opposite the debit account.
E. Under the credit column
- The amount credited is written on the credit column opposite the credit
account.
Note: A SINGLE SPACE SHOULD BE LEFT BLANK AFTER EAACH ENTRY.
PROFORMA ENTRY OF THE FOLLOWING TRANSACTIONS
 SELLER’S BOOK
OWNER’S
EQUITY
= Sale of merchandise cash basis + +
JE:
CASH XXX
SALES XXX
= Sale of merchandise on account + +
JE:
ACCOUNTS RECEIVABLE XXX
SALES XXX
= Sale of merchandise with down payment + +
JE:
CASH XXX
SALES XXX
= Sales returns and allowances (cash basis) - -
JE:
SALES RETURN AND ALLOWANCES XXX
CASH XXX
= Sales returns and allowances (on account) - -
JE:
= Sales returns and allowances (with down Sale) - -
JE:
= Partial collection of account with supplier +/-

JE:
CASH XXX
= Full collection of account beyond discount period

+/-
JE:
CASH XXX
= Full collection of account within the discount period.

+/- -
JE:
CASH XXX
SALES DISCOUNT XXX
 BUYER’S BOOK
OWNER’S
EQUITY
= Purchase of merchandise on cash basis - -
JE:
PURCHASES XXX
CASH XXX
= Purchase of merchandise on account + -
JE:
PURCHASES XXX
ACCOUNTS PAYABLE XXX
= Purchase of merchandise with down payment - + -
JE:
PURCHASES XXX
CASH XXX
= Purchase returns and allowances (cash basis) + +
JE:
CASH XXX
PURHCASE RETURNS AND ALLOWANCES XXX
= Purchase returns and allowances (on account) - +
JE:
Purchase returns and allowances (with down

- +
payment)
JE:
Partial payment of account with supplier - -
JE:
CASH XXX
Full payment of account beyond discount period - -
JE:
CASH XXX
Full payment of account within the discount period. - - +
JE:
CASH XXX
PURCHASE DISCOUNT XXX
 REMAINING TRANSACTIONS IN MERCHANDISING BUSINESS
OWNER’S
EQUITY
= Payment of freight on merchandise purchased - -
JE:
FREIGHT-IN XXX
CASH XXX
= Purchase of freight on merchandise sold - -
JE:
FREIGHT-OUT XXX
CASH XXX
= Purchase supplies on cash basis +/-

JE:
SUPPLIES XXX
CASH XXX
= Returns on supplies purchased +/-
JE:
CASH XXX
SUPPLIES XXX
= Purchase supplies on account + +
JE:
SUPPLIES XXX
= Return on supplies purchased - -
JE:
SUPPLIES XXX
= Purchase of equipment on cash basis +/-
JE:
EQUIPMENT XXX
CASH XXX
= Allowance granted in equipment purchased +/-
JE:
CASH XXX
EQUIPMENT XXX
= Purchase of equipment with down payment +/-
JE:
EQUIPMENT XXX
CASH XXX
= Allowance granted on equipment purchased - -
JE:
CASH XXX
EQUIPMENT XXX
= Incurrence of expenses + -
JE:
________ EXPENSE XXX
________ PAYABLE XXX
= Payment of expenses - -
JE:
________ EXPENSE XXX
CASH XXX
= Payment of expenses already recorded in no. 12 - -
JE:
________ PAYABLE XXX
CASH XXX
= Initial investment of merchandise by owner + +
JE:
MERCHANDISE INVENTORY XXX
CAPITAL XXX
= Initial investment of merchandise with liability + + +
JE:
MERCHANDISE INVENTORY XXX
CAPITAL XXX
= Additional investment of merchandise by owner +/-
JE:
PURCHASES XXX
CAPITAL XXX
= Owner’s withdrawal of merchandise +/-
JE: CAPITAL XXX

PURCHASES XXX
ILLUSTRATION
June 2020
1 Lee, the owner, invested Php 300,000 cash and Php 50,000 worth of merchandise
into the business. The merchandise has an unpaid Php 10,000 account from
Jesther to be assumed by the business (OR no. 001)
2 Purchased from Glen store supplies worth Php 3,000 on cash (CV no. 001)
3 Returned Php 400 worth of store supplies purchased from Glen store (OR no. 002)
4 Purchased from Henry store supplies worth Php 4,000 on account.
5 Returned Php 400 worth of store supplies purchased from Henry.
6 Purchased from Jesther store and equipment worth Php 30,000 on cash basis (CV
no. 002)
7 Lee was granted a Php 2,500 allowance on store equipment purchased from (OR
no. 003)
8 Purchased from Kenneth store equipment worth Php 40,000 on terms Php 10,000
down, balance on account (CV no. 003)
9 Lee was granted a Php 3,500 allowance on store equipment purchased from
Kenneth.
10 Received from Power Electric Corp a bill for the month of May Php 11,000.
Paid rent for the month Php 20,000 (CV no. 004)
11 Purchased from Alexa merchandise on cash basis, Php 10,000 (CV no. 005)
Paid freight on merchandise purchased from Alexa, Php 800 (CV no. 006)
12 Paid Utility bill received last June 10 (CV no. 007)
Purchased from Bench merchandise worth Php 15,000 on terms 2/10, n/30
13 The owner invested additional merchandise worth Php 12,000 into the business.
Purchased from Cherry merchandise worth Php 20,000 on terms 50% down,
balance 2/10, n/30 (CV no. 008)
14 Return Php 500 worth merchandise purchased from Alexa (OR no. 004)
15 Returned Php 1,000 worth merchandise purchased from Bench.
Sold to Daniel merchandise on cash basis, Php 10,000 (OR no. 005)
Paid freight on merchandise sold toDaniel, Php 800 (CV no. 009)
16 Returned Php 1,500 worth of merchandise purchased from Cherry.
Sold to Earl merchandise worth Php 15,000 o terms 2/10, n/30 (SI no. 001)
17 Paid Php 2,000 in partial payment of account with Cherry (CV no. 010)
Sold to Froilan merchandise worth Php 20,000 on terms 50% down, balance 2/10,
n/30 (OR no. 006)
18 Received the return of Php 500 worth of merchandise sold to Daniel (CV no. 011)
19 Received the return of Php 1,000 worth of merchandise sold to Earl.
20 Received the return of Php 1,500 worth of merchandise sold to Froilan.
21 Collected Php 2,000 from Froilan for partial payment of account (OR no. 007)
22 Paid in full account with Bench (CV no. 012)
26 Collected in full the account with Earl. (OR no. 008)
30 The Lee withdrew merchandise worth Php 6,000 for personal use.
Paid in full account with Cherry (CV no. 013)
Collected in full the account with Finn (OR no. 009)
JOURNAL ENTRIES ON SPECIAL JOURNALS
SALES JOURNAL Page:SI

INVOICE DR:ACCOUNTS RECEIVABLE
DATE CUSTOMER NAME REF. NO.
NO. CR:SALES
2020
JUN Php 15,000
16 001 EARL AR1
E
Php15,000
(031) (111)
PURCHASE JOURNAL Page: PI

DR: PURCHASES
DATE SUPPLIER NAME REF. NO.
CR: ACCOUNTS PAYABLE
202
0
JUN BENCH AP1 Php 15,000
12
E
Php 15,000
(121) (071)
GENERAL JOURNAL Page: GJ1
2020
JUNE 4 STORE SUPPLIES 056 PHP 4,000
ACCOUNTS PAYABLE-HENRY 071/A
PHP 4,000
P3
PURCHASE STORE SUPPLIES-HON
5 ACCOUNTS PAYABLE-HENRY 071/A

400
P3
STORE SUPPLIES 056 400
RETURNED STORE SUPPLIES
PURCHASED
9 ACCOUNTS PAYABLE – KENNETH 071/A

3,500
P4
STORE EQUIPMENT 063 3,500
ALLOWANCE ON STORE EQUIPMENT
PURCHASED.
1 UTILITIES EXPENSE
131 11,000
0
ACCOUNTS PAYABLE-ANGELES ELECTRIC 071/A
11,000
P5
RECEIVED BILL FROM AEC
1 PURCHASES
121 12,000
3
LEE CAPITAL 101 12,000
ADDITIONAL INVESTMENT
1 ACCOUNTS PAYABLE-BENCH 071/A

1,000
5 P1
PURCHASE RETURN AND ALLOWANCES 122 1,000
PURCHASE RETURN -BENCH
1 ACCOUNTS PAYABLE – CHERRY 071/A

1,500
6 P2
PURCHASE RETURN AND ALLOWANCES 122 1,500
PURCHASE RETURN-CHERRY
1 SALES RETURN AND ALLOWANCES

112 1,000
9
ACCOUNTS RECEIVABLE-EMS 031/A
1,000
R1
PURHCASE RETURNS-EARL
2 SALES RETURN AND ALLOWANCES

112 1,500
0
ACCOUNTS RECEIVABLE-FROILAN 031/A
1,500
R1
PURHCASE RETURNS- FROILAN
3 LEE DRAWINGS
102 6,000
0
PURCHASES 121 6,000
WITHDRAWAL OF MERCHANDISE
Learning Competency
Record transactions of a merchandising business in the general and special journal

- ABM_FABM11 – IV e - j – 36
Activity 3: JOURNALIZING!
Direction: Prepare the journal entry Chim Merchandising using the general journal
and special journal.
June 2020
1 Chim, the owner, invested Php 400,000 cash and Php 60,000 worth of
merchandise into the business. The merchandise has an unpaid Php 20,000
account from Joa to be assumed by the business (OR no. 001)
2 Purchased from Gee store supplies worth Php 4,000 on cash (CV no. 001)
3 Returned Php 400 worth of store supplies purchased from Gee store (OR no. 002)
4 Purchased from Hon store supplies worth Php 5,000 on account.
5 Returned Php 500 worth of store supplies purchased from Hon.
6 Purchased from Jes store and equipment worth Php 40,000 on cash basis (CV no.
002)
7 Chim was granted a Php 3,500 allowance on store equipment purchased from (OR
no. 003)
8 Purchased from Ken store equipment worth Php 50,000 on terms Php 10,000
down, balance on account (CV no. 003)
9 Chim was granted a Php 4,500 allowance on store equipment purchased from Ken
10 Received from Angeles Electric Corp a bill for the month of May Php 11,000.
Paid rent for the month Php 20,000 (CV no. 004)
11 Purchased from Angel merchandise on cash basis, Php 20,000 (CV no. 005)
Paid freight on merchandise purchased from Angel, Php 900 (CV no. 006)
12 Paid Utility bill received last June 10 (CV no. 007)
Purchased from Bee merchandise worth Php 25,000 on terms 2/10, n/30
13 The owner invested additional merchandise worth Php 22,000 into the business.
Purchased from Chel merchandise worth Php 30,000 on terms 50% down, balance
2/10, n/30 (CV no. 008)
14 Return Php 600 worth merchandise purchased from Angel (OR no. 004)
15 Returned Php 2,000 worth merchandise purchased from Bee.
Sold to Des merchandise on cash basis, Php 20,000 (OR no. 005)
Paid freight on merchandise sold to Des, Php 900 (CV no. 009)
16 Returned Php 2,500 worth of merchandise purchased from Chel.
Sold to Ems merchandise worth Php 25,000 o terms 2/10, n/30 (SI no. 001)
17 Paid Php 3,000 in partial payment of account with Chel (CV no. 010)
Sold to Finn merchandise worth Php 30,000 on terms 50% down, balance 2/10,
n/30 (OR no. 006)
18 Received the return of Php 600 worth of merchandise sold to Des (CV no. 011)
19 Received the return of Php 2,000 worth of merchandise sold to Ems.
20 Received the return of Php 2,500 worth of merchandise sold to Finn.
21 Collected Php 3,000 from Finn for partial payment of account (OR no. 007)
22 Paid in full account with Bee (CV no. 012)
26 Collected in full the account with Ems. (OR no. 008)
30 The owner withdrew merchandise worth Php 6,000 for personal use.
Paid in full account with Chel (CV no. 013)
Collected in full the account with Finn (OR no. 009)
SALES JOURNAL Page:SI
INVOICE DR:ACCOUNTS RECEIVABLE

DATE CUSTOMER NAME REF. NO.
NO. CR:SALES
PURCHASE JOURNAL Page: PI
DR: PURCHASES
DATE SUPPLIER NAME REF. NO.
CR: ACCOUNTS PAYABLE

Name: _____________________________ Grade Level: ________________

Section: ___________________________ Date: (Q4: W5) ______________
This lesson focuses on posting business transactions in a merchandising business.
POSTING
The next step in accounting is posting. It is the process of transferring the records
from journal to ledger. A ledger is a book of accounts that constitutes a group of different
accounts; it is also called the book of final entry. The simpler form of a ledger is a T-account.
There are two common types of ledger these are the general ledger and the subsidiary ledger.
General Ledger is used in accumulating and classifying individual transactions from

the journal. It is divided into two sides the left side and the right side. The left side is the
debited accounts and the right sides are the credited accounts.
Subsidiary Ledger is used to provide all detailed information about a specific

account. It follows all the running balances. It adds a column to determine the account
balance after posting each transaction. This means that by just looking at subsidiary ledger
you can see the balance as of the date. Subsidiary ledgers are normally applicable to
Accounts Receivable and Accounts Payable.
Procedure in Posting:
A. Locate the corresponding account title in the ledger.

B. Transfer to the ledger the following information from the general journal:
a. Date
b. Explanation
c. Amount
Note: Debit accounts from the journal are posted on the debit side of the ledger and
the credit accounts are posted on the credit side of the ledger.
C. For the folio place the page number of the journal in which information is taken
to.
Note: Folio serves as the cross-reference when it is desired to trace the amount from
one record to another.
ILLUSTRATION (POSTING OF TRANSACTIONS FROM LEE MERCHANDISE)
GENERAL LEDGER
ACCOUNT TITLE: CASH ACCOUNT NO. 001
DATE EXPANATION F DEBIT DATE EXPLANATION F CREDIT

2020 2020
CR PHP PHP
JUNE 30 JUNE 30 CD1
1 345,520 118,320
PHP TOTAL PHP
TOTAL
345,520 118,320
PHP
BALANCE
227,200
GENERAL LEDGER
ACCOUNT TITLE: ACCOUNTS RECEIVABLE ACCOUNT NO. 031

2020 2020
PHP PURHCASE RETURNS-
JUNE 30 S1 JUNE 19 GJ1 PHP 1,000
15,000 EARL
CR PURHCASE RETURNS-
30 10,000 20 GJ1 1,500
1 FROILAN
CR
30 22,500
1
PHP
TOTAL TOTAL PHP 25,000
25,000
BALANCE PHP 0
GENERAL LEDGER
ACCOUNT TITLE: MERCHANDISE INVENTORY ACCOUNT NO. 041

2020
CR PHP
JUNE 30
1 50,000
PHP
BALANCE
50,000
GENERAL LEDGER
ACCOUNT TITLE: STORE SUPPLIES ACCOUNT NO. 056

2020 2020
PURCHASE STORE RETURNED STORE
JUNE 4 GJ1 PHP 4,000 JUNE 5 GJ1 PHP 400
SUPPLIES SUPPLIES PURCHASED
CD 3,000 CR
30 30 300
1 1
TOTAL PHP 700
TOTAL PHP 7,000
BALANCE PHP 6,300
GENERAL LEDGER
ACCOUNT TITLE: STORE EQUIPMENT ACCOUNT NO. 063

2020 2020
ALLOWANCE ON
CD PHP
JUNE 30 JUNE 9 STORE EQUIPMENT GJ1 PHP 3,500
1 70,000
PURCHASED.
CR
30 2,500
1
PHP
70,000
PHP
BALANCE
64,000
GENERAL LEDGER
ACCOUNT TITLE: ACCOUNTS PAYABLE ACCOUNT NO. 071

2020 2020
JUNE 5 RETURNED STORE GJ1 PHP 400 JUNE 4 PURCHASE STORE GJ1 PHP 4,000
SUPPLIES PURCHASED SUPPLIES-HENRY
ALLOWANCE ON STORE GJ1
PURCHASE STORE
9 EQUIPMENT 3,500 10 GJ1 11,000
SUPPLIES
PURCHASED.
PURCHASE RETURN – GJ1
15 1,000 30 P1 15,000
BENCH
PURCHASE RETURN- GJ1 CR
16 1,500 30 10,000
CHERRY 1
CD CD
30 33,500 30 40,000
1 1
PHP
39,000
BALANCE PHP 40,100
GENERAL LEDGER
ACCOUNT TITLE: LEE CAPITAL ACCOUNT NO. 101

2020 2020
ADDITIONAL
JUNE 13 GJ1 PHP 12,000
INVESTMENT
CR
30 340,000
1
PHP
TOTAL PHP 0 TOTAL
352,000
PHP
BALANCE
352,000
GENERAL LEDGER
ACCOUNT TITLE: LEE DRAWINGS ACCOUNT NO. 102

2020 2020
TOTAL PHP 6,000 TOTAL PHP 0
BALANCE PHP 6,000
GENERAL LEDGER
ACCOUNT TITLE: SALES ACCOUNT NO. 111

2020 2020
JUNE 30 S1 PHP 15,000
CR
30 30,000
1
TOTAL PHP 0 TOTAL PHP 45,000
BALANCE PHP 45,000
GENERAL LEDGER
ACCOUNT TITLE: SALES RETURN AND ALLOWANCES ACCOUNT NO. 122

2020 2020
PURHCASE RETURNS-
EARL
PURHCASE RETURNS-
20 GJ1 1,500
FROILAN
CD
30 500
1
TOTAL PHP 3,000 TOTAL PHP 0
BALANCE PHP 3,000
GENERAL LEDGER
ACCOUNT TITLE: SALES DISCOUNT ACCOUNT NO. 113

2020 2020
CR
JUNE 30 PHP 280
1
TOTAL PHP 280 TOTAL PHP 0
BALANCE PHP 280
GENERAL LEDGER
ACCOUNT TITLE: PURCHASES ACCOUNT NO. 121

2020 2020
ADDITIONAL PHP WITHDRAWAL OF
JUNE 13 GJ1 JUNE 30 GJ1 PHP 6,000
INVESTMENT 12,000 MERCHANDISE
30 BENCH P1 15,000
CD
30 30,000
1
PHP
57,000
PHP
BALANCE
51,000
GENERAL LEDGER
ACCOUNT TITLE: PURCHASE RERTURN AND ALLOWANCES ACCOUNT NO. 122

2020 2020
PURCHASE RETURN
-BENCH
PURCHASE RETURN-
16 GJ1 1,500
CHERRY
CR
30 500
1
TOTAL PHP 0 TOTAL PHP 3,000
BALANCE PHP 3,000
GENERAL LEDGER
ACCOUNT TITLE: PURCHASE DISCOUNT ACCOUNT NO. 123

2020 2020
CD
JUNE 30 PHP 280
1
BALANCE PHP 280
GENERAL LEDGER
ACCOUNT TITLE: FREIGHT IN ACCOUNT NO. 125

2020 2020
CD
JUNE 30 PHP 800
1
BALANCE PHP 800
GENERAL LEDGER
ACCOUNT TITLE: UTILITIES EXPENSE ACCOUNT NO. 131

2020 2020
PHP
JUNE 10 RECEIVED BILL FROM EC GJ1
11,000
PHP
TOTAL TOTAL PHP 0
11,000
PHP
BALANCE
11,000
GENERAL LEDGER
ACCOUNT TITLE: RENT EXPENSE ACCOUNT NO. 133

2020 2020
CD PHP
JUNE 30
1 20,000
PHP
TOTAL TOTAL PHP 0
20,000
PHP
BALANCE
20,000
GENERAL LEDGER
ACCOUNT TITLE: FREIGHT-OUT ACCOUNT NO. 139

2020 2020
CD
JUNE 30 PHP 800
1
BALANCE PHP 800
ACCOUNTS RECEIVABLE – EARL AR1

DATE ITEMS F DEBIT CREDIT BALANCE
2020
1
JUNE SALE 2/10, N/30 S1 PHP 15,000 PHP 15,000
6
1
RETURNS GJ1 1,000 14,000
9
2
FULL COLLECTION CR1 14,000 0
6
ACCOUNTS RECEIVABLE – FROILAN AR2

2020
1
JUNE SALE-BALANCE 2/10,N/30 CR1 PHP 10,000 PHP 15,000
7
2
RETURNS GJ1 1,500 8,500
0
2
PARTIAL COLLECTION CR1 2,000 6,500
1
3
FULL COLLECTION CR1 6,500 0
0
ACCOUNTS PAYABLE – BENCH AP1

2020
1
JUNE PURCHASE 2/10, N/30 P1 PHP 15,000 PHP 15,000
2
1
RETURNS GJ1 PHP 1,000 14,000
5
2
FULL PAYMENT CD1 14,000 0
2
ACCOUNTS PAYABLE – CHERRY AP2

2020
1
JUNE PURCHASE BAL. 2/10, N/30 CD1 PHP 10,000 PHP 10,000
3
1
RETURNS GJ1 PHP 1,500 ` 8,500
6
1
PARTIAL PAYMENTS CD1 2,000 6,500
7
3
FULL PAYMENT CD1 6,500 0
0
ACCOUNTS PAYABLE – HENRY (STORE SUPPLIES) AP3

2020
JUNE 4 PURCHASE ON ACCOUNT GJ1 PHP 4,000 PHP 4,000
5 RETURNS GJ1 PHP 400 3,600
ACCOUNTS PAYABLE – KENNETH (STORE EQUIPMENT AP4

2020
JUNE 8 PURCHASE-BAL. ON ACCOUNT CD1 PHP 30,000 PHP 30,000
9 ALLOWANCE GJ1 PHP 3,500 26,500
ACCOUNTS PAYABLE – EC (UTILITIES) AP5

2020
1
JUNE RECEIVED BILL GJ1 PHP 11,000 PHP 11,000
0
1
PAID BILL CD1 PHP 11,000 0
2
ACCOUNTS PAYABLE – JESTHER AP6

2015
JUNE 1 BALANCE CR1 PHP 10,000 PHP 10,000
Learning Competency
Post transactions in the general and subsidiary ledgers - ABM_FABM11 – IV e - j – 37
Activity 4: POSTING!
Direction: Using the journal entries of Chim Merchandise post the transaction to the
general ledger and the subsidiary ledger
GENERAL LEDGER
ACCOUNT TITLE: CASH ACCOUNT NO. 001

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: ACCOUNTS RECEIVABLE ACCOUNT NO. 031

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: MERCHANDISE INVENTORY ACCOUNT NO. 041

2020
GENERAL LEDGER
ACCOUNT TITLE: STORE SUPPLIES ACCOUNT NO. 056

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: STORE EQUIPMENT ACCOUNT NO. 063

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: ACCOUNTS PAYABLE ACCOUNT NO. 071

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: CHIM CAPITAL ACCOUNT NO. 101

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: CHIM DRAWINGS ACCOUNT NO. 102

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: SALES ACCOUNT NO. 111

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: SALES RETURN AND ALLOWANCES ACCOUNT NO. 122

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: SALES DISCOUNT ACCOUNT NO. 113

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: PURCHASES ACCOUNT NO. 121

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: PURCHASE RERTURN AND ALLOWANCES ACCOUNT NO. 122
2020 2020
GENERAL LEDGER
ACCOUNT TITLE: PURCHASE DISCOUNT ACCOUNT NO. 123

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: FREIGHT IN ACCOUNT NO. 125

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: UTILITIES EXPENSE ACCOUNT NO. 131

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: RENT EXPENSE ACCOUNT NO. 133

2020 2020
GENERAL LEDGER
ACCOUNT TITLE: FREIGHT-OUT ACCOUNT NO. 139

2020 2020
ACCOUNTS RECEIVABLE – EMS AR1

2020
ACCOUNTS RECEIVABLE – FINN AR2

2020
ACCOUNTS PAYABLE – BEE AP1

2020
ACCOUNTS PAYABLE – CHEL AP2
2020
ACCOUNTS PAYABLE – HON (STORE SUPPLIES) AP3

2020
ACCOUNTS PAYABLE – KEN (STORE EQUIPMENT) AP4

2020
ACCOUNTS PAYABLE – AEC (UTILITIES) AP5

2020
ACCOUNTS PAYABLE – JOA AP6

2015
Name: _____________________________ Grade Level: ________________

Section: ___________________________ Date: (Q4: W6) ______________
This lesson focuses on preparation of trial balance of the business transactions in a

merchandising business.
TRIAL BALANCE
A trial balance is a list of account with an open balance in the general ledger. It will
prove the equality of all the debits and all the credits.
TYPES OF TRIAL BALANCE
The Trial Balance of Balances contains accounts with open balances. An account
with an open balance is either a debit balance or a credit balance. An account is said to be a
debit balance if the total debit is more than the credit total. And if the account is said to be a
credit balance the total credit is more than the debit total. If the debit and credit are equal, the
account is zero balance therefore it is a closed account.
The Trial Balance of Totals the totals of the debit and credit of each account are
listed.
Procedure in Preparation of Trial Balance:
A. Write the heading of the trial balance which includes:

a. Name of the business
b. Title of the list or trial balance
c. Date of the trial balance
B. Provide two money columns for debit and credit.
C. The account should be written in one arrangement:
a. Assets
b. Liabilities
c. Owner’s Equity
d. Income
e. Expenses
D. Write the amount opposite the corresponding accounts under debit money column
and credit money column.
E. Foot the money columns.
F. Double rule the totals of debit and credit both should be equal.
ILLUSTRATION (PREPARATION OF TRIAL BALANCE OF LEE

MERCHANDISE)
LEE MERCHANDISING
TRIAL BALANCE
JUNE 30, 2020
CASH PHP 227,200 .

MERCHANDISE INVENTORY 50,000
STORE SUPPLIES 6,300
STORE EQUIPMENT 64,000
ACCOUNTS PAYABLE
PHP 40,100
LEE, CAPITAL
352,000
LEE, DRAWINGS 6,000
SALES
SALES RETURN AND ALLOWANCES 45,000
3,000
SALES DISCOUNT 280
PURHCASES 51,000
PURCHASE RETURN AND ALLOWANCES
PURCHASE DISCOUNT 3,000
FREIGHT-IN 280
UTILITIES EXPENSE 800
RENT EXPENSE 11,000
FREIGHT-OUT 20,000
800
PHP 440,380 PHP 440,380
Learning Competency
Prepare trial balance - ABM_FABM11 – IV e - j – 38
Activity 5: TRIAL BALANCE!
Direction: Using the balances on the ledger and subsidiary ledger prepare the Trial
Balance of Chim Merchandise.
_________________________________
_________________________________
_________________________________

Name: _____________________________ Grade Level: ________________

Section: ___________________________ Date: (Q4: W7) ______________
This lesson focuses on discussing the adjusting entries, adjusted trial balance and
financial statements.

ADJUSTING ENTRIES
The length of time in which the life of a business is divided into monthly, quarterly,
semi-annually or annually is what we call accounting period. At the end of each accounting
period, reports are prepared to show the outcome of the operation of the business.
Reports such as income statement, balance sheet should always reflect the income
realized and the expenses incurred the fair measurement of the assets, liabilities and owner’s
equity. And at the end of each accounting period there are several accounts that are needed to
be adjusted.
The accounts that need to be adjusted are:

1. Adjustment for the expiration of the prepayments of expenses
2. Adjustment for the realization of income collected in advance
3. Adjustment for the accrual of expenses
4. Adjustment for the accrual of income
5. Provision for bad debts
6. Provision for depreciation
ILLUSTRATION (PREPARATION OF ADKUSTING ENTRIES AND ADJUSTED

TRIAL BALANCE OF LEE MERCHANDISE)
ADJUSTMENT DATA:
1. Salaries incurred in June but which remain unpaid as of June 30 amounted to Php
10,000.
2. Store supplies for the month of June totaled Php 4,900.
3. Merchandise inventory at Jun 30 is determined to be Php 68,720.
4. Store equipment is estimated to have a salvage value of Php 10,000 and useful life
of six years.
Adjusting Entries:

2020
3 SALARIES EXPESNE
JUNE 132 PHP 10,000
0
ACCRUED SALARIES 075 PHP 10,000
TO RECOGNIZE ACCRUED EXPENSE
3 STORE SUPPLIES EXPESNE

137 4,900
0
STORE SUPPLIES 056 4,900
TO RECOGNIZE EXPIRED PORTION
3 MERCHANDISE INVENTORY, END

041 PHP 68,720
0
INCOME AND EXPENSE SUMMARY 180 PHP 68,720
TO SET-UP ENDING INVENTORY
3 DEPRECIATION - STORE EQUIPMENT

041 750
0
ACCUMULATED DEPRECIATION – STORE
180 750
EQUIPMENT
TO RECORD DEPRECIAITON
{[(PHP 82,000-PHP 20,000)/7] X 1 /12}
Adjusted Trial Balance:
STEP I: Rewrite the unadjusted trial balance and add the adjustments.
LEE MERCHANDISING
TRIAL BALANCE
JUNE 30, 2020
DEBIT CREDIT
CASH PHP 227,200 .
STORE SUPPLIES 6,300 PHP 4,900
ACCOUNTS PAYABLE
PHP 40,100
CHIM, CAPITAL
352,000
CHIM, DRAWINGS 6,000
SALES
3,000
SALES DISCOUNT
PURHCASES
280
PURCHASE RETURN AND ALLOWANCES
51,000
PURCHASE DISCOUNT
FREIGHT-IN 3,000
UTILITIES EXPENSE
RENT EXPENSE 280
FREIGHT-OUT 800
ACCRUED SALARIES EXPENSE 20,000
STORE SUPPLIES EXPENSE 800
DEPRECIATION-STORE EQUIPMENT
ACCUMULATED DEPRECIATION-STORE
EQUIPMENT 10,000
10,000
4,900
750
750
PHP 440,380 PHP 15,650 PHP 440,380 PHP 15,650

PHP 451,130 PHP 451,130
STEP II: Re-arrange the account titles according to their classification and adjust the
amount as to increase or decrease.
LEE MERCHANDISING
JUNE 30, 2020
CASH PHP 227,200 .

ACCUMULATED DEPRECIATION-STORE EQUIPMENT
PHP 750
ACCOUNTS PAYABLE
CHIM, CAPITAL 40,100
CHIM, DRAWINGS 10,000
SALES 352,000
SALES DISCOUNT 45,000
PURHCASES 3,000
PURCHASE RETURN AND ALLOWANCES 280
PURCHASE DISCOUNT 51,000
FREIGHT-IN 3,000
RENT EXPENSE 800
FREIGHT-OUT 11,000
DEPRECIATION-STORE EQUIPMENT 10,000
4,900
750
PHP 451,130 PHP 451,130

FINANCIAL STATEMENTS
After adjusting the accounts, financial statements are prepared. There are two basic
accounting reports: Income Statement which contains the income and expenses accounts that
will show the business operation or the performance of the business. The other one is the
Balance Sheet that contains the assets, liabilities and owner’s equity if of the business it
shows the financial condition of the business.
Income Statement or Statement of Financial Performance has two forms: the multiple
step form and the single step form. The single step is commonly used by service concern. In
which all expenses incurred are deducted from the income earned in order to get the net
income.
Balance Sheet has also two forms: the Report Form and Account Form. The Report
Form, the assets, liabilities and owner’s equity sections are in vertical order. While an
Account Form, the assets are on the left side and the liabilities and owner’s equity are on the
right side like the accounting equation.
Financial Statements
LEE MERCHANDISING
INCOME STATEMENT
FOR THE MONTH ENDED JUNE 30, 2020
SALES PHP 45,000

LESS: PHP 3,000
SALES RETURN AND ALLOWANCES 280 3,280 PHP 41,720
SALES DISCOUNT
LESS: COST OF GOOD SOLD
MERCHANDISE INVENTORY, BEG. PHP 50,000
ADD:
PURCHASES PHP 51,000
LESS: PURCHASE RETURN AND (3,000)
ALLOWANCES
PURCHASE DISCOUNT (280) 47,720
ADD: PHP 97,720
FREIGHT IN 800
COST OF GOODS AVAILABLE FOR SALE PHP 98,520
LESS: 29,800
(68,720)
MERCHANDISE INVENTORY, END PHP 11,920
GROSS PROFIT
LESS:OPERATING EXPENSES
PHP 4,900
STORE SUPPLIES EXPENSE
FREIGHT-OUT 800 6,450
DEPRECIATION-STORE EQUIPMENT 750
LESS:ADMINISTRATIVE EXPENSES
RENT EXPENSE PHP 20,000
UTILITIES EXPENSE 11,000 41,000
NET LOSS (PHP 35,530)
LEE MERCHANDISING
BALANCE SHEET
JUNE 30, 2020
ASSETS
CURRENT:
CASH PHP 227,200
STORE SUPPLIES 1,400 PHP 297,320
NON-CURRENT:
STORE EQUIPMENT PHP 64,000
LESS: ACCUMULATED DEPRECIATION (750) 63,250
LIABILITIES AND OWNER’S EQUITY

CURRENT:
ACCOUNTS PAYABLE PHP 40,100
ACCRUED SALARIES 10,000 PHP 50,100
CHIM, CAPITAL, BEG. PHP 352,000

ADD: NET LOSS (PHP 35,530)
LESS:CHIM DRAWINGS ( 6,000) (41,530) 310,470
TOTAL LIABILITIES AND PHP 360,570
OWNER’S EQUITY
LEE MERCHANDISING
STATEMENT OF CHANGES IN EQUITY
CHIM, CAPITAL, BEG. PHP 352,000

ADD: NET LOSS (PHP 35,530)
LESS:CHIM DRAWINGS ( 6,000) (41,530)
CHIM, CAPITAL, END PHP 310,470
Learning Competency
Prepare adjusting entries - ABM_FABM11 – IV e - j – 39

Completes the accounting cycle - ABM_FABM11 – IV e - j – 40
Activity 6: ADJUSTING!
Direction: Using the Trial Balance you prepared for Chim Merhcandise prepare the
Adjusting Entries, Adjusted Trial Balance and Financial Statements of the business.
ADJUSTMENT DATA:
i. Merchandise inventory at Jun 30 is determined to be Php 78,720.
ii. Salaries incurred in June but which remain unpaid as of June 30 amounted to Php
20,000.
iii. Store supplies for the month of June totaled Php 5,900.
iv. Store equipment is estimated to have a salvage value of Php 20,000 and useful life
of seven years.
Adjusting Entries:

2020
Adjusted Trial Balance

_________________________________
_________________________________
_________________________________

Financial Statements
INCOME STATEMENT
_________________________________
_________________________________
_________________________________
BALANCE SHEET
_________________________________
_________________________________
_________________________________
STATEMENT OF CHANGES IN EQUITY
_________________________________
_________________________________
_________________________________
Name: _____________________________ Grade Level: ________________

Section: ___________________________ Date: (Q4: W8) ______________
This lesson focuses on discussing the closing entries, posy-closing trial balance and
reversing entries.
CLOSING ENTRIES
After the income statement has been prepared, the nominal or temporary accounts
have served its purpose that they have been to measure and show the nature of the financial
condition.
The income and expense accounts are not accumulated. They are computed for each
accounting period. Therefore these accounts should be closed.
To close the nominal or temporary accounts:
1. Debit the Income Account and credit the Income and Expense Summary
account.
2. Credit the Expense Accounts and debit the Income and Expense
Summary account.
3. Get the difference of the Income and Expense Summary
account. The difference should be closed to the capital account.
4. If there is a drawing account, the difference of the Income and
Expense Summary account should be closed to this account, the drawing
account then is closed to the capital account.

2020
11
JUNE 30 SALES PHP 45,000
1
PURCHASE RETURNS AND ALLOWANCES 12
3,000
2
PURCHASE DISCOUNT 12
280
3
INCOME AND EXPENSE SUMMARY 18
PHP 48,280
0
TO CLOSE NOMINAL ACCOUNT.

152,530
0
MERCHANDISE INVENTORY, BEG. 04
50,000
1
SALES RETURN AND ALLOWANCES 11
3,000
2
SALES DISCOUNT 11
280
3
PURHCASES 12
51,000
1
FREIGHT IN 12
800
5
11,000
1
SALARIES EXPENSE 13
10,000
2
RENT EXPENSE 13
20,000
3
4,900
7
FREIGHT-OUT 13
PHP 800
9
DEPRECIATION EXPENSE-STORE EQUIPMENT 14
750
1
TO CLOSE NOMINAL ACCOUNT.
LEE, DRAWINGS 18 PHP 35,530

0
35,530
2
TO CLOSE INCOME AND EXPENSE SUMMARY (NET LOSS)
LEE, CAPITAL 10
41,530
1
LEE, DRAWINGS 10
41,530
2
TO CLOSE DRAWING ACCOUNT (PHP 6,000 + Php
56,618)
To see the accounts in the ledger are in their correct balance before the transactions of
the next accounting period are posted, a post-closing trial balance should be prepared.
LEE MERCHANDISING
JUNE 30, 2020
CASH PHP 227,200 .

ACCUMULATED DEPRECIATION-STORE EQUIPMENT PHP 750
ACCOUNTS PAYABLE
40,100
CHIM, CAPITAL
10,000
310,470
PHP 361,320 PHP 361,320
REVERSING ENTRIES
Reversing entries are the entries done at the beginning of the next accounting period
to reverse the adjusting entries done in the previous accounting period.
The following are the adjusting entries that are needed to be reversed at the beginning
of the next accounting period.
1. Accrual of Expenses
2. Accrual of Income
3. Prepayment of Expenses (Expense Method)
4. Pre-collection of Income (Income Method)

2020
ACCRUED SALARIES 07
JUNE 30 PHP 10,000
5
SALARIES EXPENSE 13
PHP 10,000
2
Learning Competency
Completes the accounting cycle - ABM_FABM11 – IV e - j – 40
Activity 7: CLOSE, POST-CLOSE, & REVERSE!
Direction: Using the Adjusted Entries, Adjusted Trial balance and the Financial
Statement of Chim Merchandise, prepare the Closing Entries, Post-Closing Trial
Balance and the Reversing Entries of the business.
Closing Entries

2020
Post-Closing Trial Balance
_________________________________
_________________________________
_________________________________
Reversing Entries

2020
Name: _____________________________ Grade Level: ________________

Section: ___________________________ Date: (Q4: W9) ______________
This lesson focuses on discussing the cost of goods sold statement and gross profit
statement.
COST OF GOODS SOLD
A statement of cost of goods sold is part of the income statement that complies to the
accounting period. This is not considered as one of the main elements in the preparation of
the financial statement. This may be found on the disclosure of the financial statement.
The statement of cost of goods sold is based on the periodic inventory system formula
which is beginning inventory plus the purchases less ending inventory.
ILLUSTRATION (LEE MERCHANDISING)
LEE MERCHANDISING
STATEMENT OF COST OF GOOD SOLD

ADD:
ALLOWANCES
PURCHASE DISCOUNT (280)
NET PURCHASE PHP 47,720
ADD: FREIGHT IN 800 48,520
LESS: MERCHANDISE INVENTORY, END 68,720
COST OF GOODS SOLD PHP 29,800
STATEMENT OF GROSS PROFIT

Gross profit is the profit that the business makes after the deduction of all the cost in
making and selling the good or the cost that is involve in providing a service. Gross profit
appears on the income statement that can be computed by subtracting the cost of goods sold
from the revenue.
ILLUSTRATION (LEE MERCHANDISING)
LEE MERCHANDISING
GROSS PROFIT
SALES PHP 45,000

LESS: PHP 3,000
SALES RETURN AND ALLOWANCES 280 3,280 PHP 41,720
SALES DISCOUNT
LESS: COST OF GOOD SOLD
ADD:
ALLOWANCES
PURCHASE DISCOUNT (280) 47,720
ADD: PHP 97,720
FREIGHT IN 800
LESS: 29,800
(68,720)
MERCHANDISE INVENTORY, END PHP 11,920
GROSS PROFIT
Learning Competency
Prepare the statement of cost of goods sold and gross profit

- ABM_FABM11 – IV e - j – 41
Activity 8: COGS & GP!
Direction: Prepare the Cost of Goods Sold and the Gross Profit.
Cost of Goods Sold

_________________________________
_________________________________
_________________________________
Gross Profit
_________________________________
_________________________________
_________________________________
ANSWER KEY
Reference:
Arganda, Amelia M., Atis, Teresa Cardenas. 2011. Accounting Principles Fourth Edition:

Mandaluyung Philippines: National Bookstore.
Tugas, Florencz C., Salendrez, Herminigilda E., Rabo, Joy S. 2016. Fundamentals of

Accountancy, Business and Managemnt 1: Quezon City Philippines: Vibal Group, Inc.

Prepared by:

MARY ROSE G. VERGARA
Senior High School Teacher II
Angeles City National High School – SHS

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1

ABM – FUNDAMENTALS OF ACCOUNTING 1

Division of Angeles City

Learning Activity Sheets

Name: _____________________________ Grade Level: ________________

The accounts that need to be adjusted are:

Adjustment for the Expiration of Prepayment of Expenses

There are two methods to be used:

Nov. 5 Prepaid Rent Php 30,000

Dec. 31 Rent Expense Php 20,000

On November 5 of the current year, A. Pamintuan paid Php30,000 for a three-

Nov. 5 Rent Expense Php 30,000

Dec. 31 Prepaid Rent Php 10,000

If you are using EXPENSE method the amount to be recorded in your

There are two methods to be used:

Nov. 5 Cash Php 30,000

Dec. 31 Rent Income Php 10,000

If you are using INCOME method the amount to be recorded in your

Nov. 5 Cash Php 30,000

Dec. 31 Unearned Rent Income Php 10,000

Dec. 31 Salaries Expense Php 1,500

Dec. 31 Accrued Rent Income Php 5,000

Provision of Bad Debts

The entry to adjust the bad debts is:

Bad Debts Php XXX

1. Increasing the accumulated allowance for bad debts by a certain

2. Increasing the accumulated allowance for bad debts to a certain percentage

1. Increasing the accumulated allowance for bad debts by a certain percentage of

Bad Debts estimate = Php 7,000 x .10 = Php 700

Bad Debts Php 700

Balance Sheet Presentation:

Accounts Receivable Php 7,000

2. Increasing the accumulated allowance for bad debts to a certain percentage of

Bad Debts estimate = Php 7,000 x .10 = Php 700

Allowance for Bad Debts Php 500

Bad Debts Php 200

Balance Sheet Presentation:

Accounts Receivable Php 7,000

DEPRECIATION = (ORIGINAL COST – SALVAGE VALUE) / ESTIMATED

Depreciation – Service Truck Php 20,000

Balance Sheet Presentation:

Service Truck Php 250,000

D = {[(C – S) / n ] / 12 mos. x no. of mos. used}

Note: 9 months if from April 9, 2020 up to December 31, 2020.

Depreciation – Service Truck Php 15,000

Balance Sheet Presentation:

Service Truck Php 250,000

1. An actual count of repair supplies showed a balance of Php 850.

Prepare the Adjusting Entries and the Adjusted Trial Balance.

1. Repair supplies used Php 650

2. Depreciation – repair tools 120

3. Depreciation – furniture and fixtures 433

Depreciation – service truck 667

4. Interest expense 325

5. Service Income 900

6. Salaries and Wages 250

Rent Expense 500

Name: _____________ Grade Level:

Name: _____________ Grade Level:

Name: _____________ Grade Level: