FUNDAMENTALS OF ACCOUNTANCY,

BUSINESS AND MANAGEMENT 1

MODULE
Module No. 4: Week 4: Second Quarter
PREPARING JOURNAL, LEDGER AND TRIAL BALANCE OF A MERCHANDING
BUSINESS

Learning Competencies
1, Records transactions of a merchandising business in the general and special journals
2. Posts transactions in the general and subsidiary ledgers.
3. Prepares a trial balance
Code: ABM_FABM11-IVe-j-36; ABM_FABM11-IVe-j -37; ABM_FABM11- IVe-j -38;

Objective
After reading this module, the learners will be able to:
1. prepare general journal and special journal for a merchandising business.
2. prepare general ledger and subsidiary ledger for a merchandising business.
3. prepare unadjusted trial balance for a merchandising business.

Let’s Recall
Hey there! Before we start another chapter
of your accounting life, let us refresh our
memory. I want you to look closely on the
illustration. Can you identify what is it? If
you are able remember the illustration. I am
confident that you will enjoy this module.

*Step 10 is recording reversing entries, but it is optional.

Let’s Understand
From your previous lessons, you learned and practiced how to properly analyze, record
and post transactions of a service business. In this module, you will apply those learnings
in journalizing and posting transactions of a merchandising business.

WTY Furniture Store is owned and managed by Mina Ty. It was organized as
a sole proprietorship. The store provides high quality and affordable tables,
chairs, bed, and cabinets to clients as a revenue source. It began its operations
on December 1, 2019. Let us help Mrs. Ty, in recording and posting her
business transactions below.

BUSINESS TRANSACTIONS:

Dec 01 Mina Ty invested P1,500,000 to open WTY Furniture Store.

01 Purchased tables and chairs from Blims Manufacturing at a list price of P850,000.
03 Purchased P520,000 worth of bed and cabinets from Blims Manufacturing on account

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 05 Sold tables and chairs costing P250,000 for P350,00 to RBB Company.
06 Billed Specter Law firm for tables and cabinets costing P400,000 for P520,000 with
credit terms 5/10, n/30.
10 Paid salary of staff, P8,000.
22 Specter Law firm returned broken items with purchase price of P25,000 and cost of
P18,000.
24 Returned damaged furniture worth P18,000 to Blims Manufacturing.

Hey there! Before you move on, do you already have an idea on how we can help Mrs. Ty
in recording and posting the transaction of her business? Well, let us evaluate the type of
business that she has and the inventory system that we will use.
1. The nature of the business based on activity is a merchandising business.
2. Her business, is a furniture shop. For this example, we will use perpetual inventory
system.

Recording in the General and Special Journals

If all the transactions are recorded in the General Journal:

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 If the business will choose to record the same transactions using special journals for WTY Furniture Store:
Note: Special journals were discussed on FABM1 Module5 First Quarter. Special journals template varies based on the preference of the company .
CASH RECEIPTS JOURNAL CR1
Accounts Cost of goods sold Dr.
Accounts Receivable Other Merchandise
Date Credited Explanation PR Cash Dr. Cr. Sales Cr. Accounts Cr. Inventory Cr. Date Description
2019 2019
Dec. 5 Sales sales on cash 401 P350,000- P350,000- P250,000- Dec. 1 the acquisition of inve
Dec. 10 paid salaries of employ

SALES JOURNAL SJ1 PURCHASES

Customer
Accounts Sales Taxes Cost of goods sold Dr.
Date (Account Credit Terms Sales Cr. Supplier's Account
Receivable Dr. payable Cr. Merchandise Inventory Cr.
Debited) Date Credited
2019 2019
Dec. 6 Specter Law Firm 5/10, n/30 P520,000- P520,000- P400,000- Dec. 3 Blims Manufacturing

CR1 CASH DISBURSEMENT JOURNAL CD 1

Cost of goods sold Dr. Accounts Merchandise
Other Accounts
Merchandise Payable Inventory Cash Cr.
Dr.
Inventory Cr. Date Description Payee Check # Dr. Dr.
2019 Blims
P250,000- Dec. 1 the acquisition of inventory for cash Manufacturing P850,000- P850,000-
Dec. 10 paid salaries of employees P8,000- 8,000-

PURCHASES JOURNAL PJ1

goods sold Dr. Merchandise Accounts

dise Inventory Cr. Supplier's Account Inventory Dr. Payable
Date Credited Cr.
2019
P400,000- Dec. 3 Blims Manufacturing P520,000- P520,000-

Posting to the General and Subsidiary Ledger

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If the WTY Furniture store’s Account Receivable and Accounts Payable using subsidiary ledgers:
Note: Subsidiary ledgers were discussed on FABM1 Module5 First Quarter.

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Accounts Receivable Subsidiary Ledger
SPECTER RETAIL STORE Compare the balance with
Date Ref Debit Credit Balance Accounts receivable
Dec. 6, 2019 GJ1 P520,000- P520,000- account in the General
Dec. 22, 2019 GJ1 P25,000- P495,000- Ledger. Are they the same?

Accounts Payable Subsidiary Ledger

BLIMS APPLIANCE STORE Compare the balance with
Date Ref Debit Credit Balance Accounts payable account
Dec. 3, 2019 GJ1 P520,000- P520,000- in the General Ledger. Are
Dec. 22, 2019 GJ1 P18,000- P502,000- they the same?

Preparing the Unadjusted Trial Balance

Note: Always remember to write the heading first at the top center of the page – (first line - name of the company; second
line – title of report; third line – date of the report). Also, always follow the proper order in preparing the trial balance: (1-
asset, 2-liabilities, 3-equity, 4-revenue/income, and 5-expenses). Now, let us prepare the unadjusted trial balance for the
accounts posted above.

GENERAL INSTRUCTION:
1.Read and follow instructions carefully.
2. COPY and ANSWER on a separate sheet of paper.
3. Answer this activity with all HONESTY and INTEGRITY.

Let’s Apply
Activity 1: Identify the type of journal to be used in recording the transactions described below:
Write:
A. Sales Journal B. Purchase Journal C. Cash Receipts Journal
D. Cash Payments Journal E. General Journal
1. Mr. Mike Ross, the sole owner of HR Water Station, invested P1,000,000 to the business.
2. He purchased equipment costing P250,000 acquired for cash from WT Merchandising.
3. Accounts payable of P160,000 was settled.
4. Salaries expense of P280,000 was paid.
5. Owner’s drawings during the period totaled P70,000.

Let’s Analyze
Complete the table: Analyze the transaction made by Cai’s General Merchandise for the
month of March 2020. Identify the accounts affected following the Perpetual Inventory
System.

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Ms. Cai Monel owned a business named CAI’S GENERAL MERCHANDISE and had the following
transactions for the month of March 2020.

Perpetual
Transaction Accounts Affected
Date Dr. Cr.
March.
1 Ms. Monel invested P 500,000 in cash in the business.
Purchased goods worth P455,700 on account from Litt
4 Company, terms 2/10, n/30.
Purchased P105,800 worth of goods from Harvey Corp on
7 account, with terms 3/15, 2/25, n/30.
Sold goods to Robylita Management worth P550,400 in cash.
10 The cost of the goods is P180,900.
The company returned P20,000 worth of goods to Litt
12 Company.
Robylita Management returned P165,120 worth of damage
14 goods. Cost of the returned merchandise is P54,270.
18 Paid salaries of employees, P27,900.
18 Paid the advertisement worth P93,780 to a local paper.
Sold goods to Cabales Inc. P690,800 on account. The cost
of goods is P289,590, terms F.O.B destination (freight bill is
19 P2,000).
21 Paid Harvey Corp in full.
24 Collected 30% of the account of Cabales Inc.
25 The owner withdraws P55, 890 for personal use.
Purchased goods worth P190,800 in cash and sold it to a
27 customer for P450,700.
Let’s Try
Read and answer each statement/problem carefully.

1. Record the transaction of CAI’S

GENERAL MERCHANDISE in a general
journal.
2. Post the transactions using the general
ledger.
3. Prepare the Unadjusted trial balance.

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