UNIVERSITY OF CEBU LAPU LAPU AND MANDAUE

SENIOR HIGH SCHOOL DEPARTMENT

COMPILATION NOTES FOR ABM 2

CONTINUATION
Review of Journal Entries, T-Accounts, General Ledger, and Trial Balance

EXERCISE 5 – 1

Journalizing a Service Concern Business

Judylaine Berhay opened a laundry shop business in Dipolog City. With the given chart of accounts,
record the following narrative transactions in a two (2) column General Journal:

Chart of Accounts

Assets Owner’s Equity

Cash in Bank J. Beyhay Capital

Accounts Receivable J. Berhay, Drawing
Unused Laundry Supplies Income
Prepaid Insurance Laundry Income
Laundry Equipment Expenses
Delivery Equipment Salaries Expense
Liabilities Taxes and Licenses
Notes Payable Utilities Expense
Accounts Payable Repairs and Maintenance
Unearned Laundry Income Rental Expense

Transactions:

March 1 – Opened an account with the Bank of the Phil. Island and made initial deposit of P500,000
under savings account.
2 – Bought laundry machine on account costing P250,000 and issued a promissory note.
5 – Bought laundry supplies on account, P12,000.
7 – Laundry income for the week:
Cash Basis P14,500
Billings to various customers 10,300
9 – Paid P5,000 for vehicle insurance.
11 – Paid 8,300 for taxes and licenses to the city government.
12 – Partial collections from customers’ account of March 7, P2,300
14 – Received a bill from Caltex Gasoline Station for gasoline and oil, P8,000.
- Laundry income for the week:
On cash basis P30,000
Billings to various customers 20,000
16 – Withdrew cash of P5,000 for personal use.
18 – Full collection of customer’s account of May 7, P8,000
20 – Partial payment of account on bill from Caltex Gasoline Station of May 15, P5,000.
21 – Laundry Income for the week:
Cash Basis P12,000
Billings to various customers 15,000
23 – Received cash from a customer but service has yet to be rendered, P3,000.
24 – Received a bill from Caltex Gasoline Station for gasoline withdrawn, P10,000.
25 – Full payment of account on bill from Caltex Gasoline Station of May 14, P3,000.
28 – Laundry Income for the week:
On cash basis P15,000
Billings to various customers 25,000
29 – Full payment of the promissory note issued on March 2 for laundry machine, P250,000.
30 – Paid electric and water bills for the month, P25,000.
 31 – Paid salaries to employees, P20,000.
- Full payment of laundry supplies bought on March 5, P12,000.
- Receive a bill from Caltex Gasoline Station, P4,500.
- Paid rental in the amount of P5,000.
- Made additional investment of P50,000 and deposited to the bank.

EXERCISE 5 – 2

Tacloban Trucking Services, owned and managed by Letty Bartolome has started its operation in
2013. Her bookkeeper has made the following opening entry in General Journal on January 1, 2014
based on the ending balance of the following accounts on December 31, 2013.

January 1, 2014

Cash in Bank P 910,000

Petty Cash Fund 1,000
Tires and Tubes 9,800
Spare Parts Inventory 1,500
Hauling Trucks 1,680,000
Accounts Payable P 20,000
L. Bartolome, Capital 2,582,300
To take up the opening entry on January 1, 2014.

Her completed transactions for the month of January 2014 are as follows:

Jan. 3 – Withdrew cash of P15,000 from the business for personal use.
6 – Bought various spare parts on account, P 8,000.
7 – Paid taxes including with that of the Land Transportation Office, P8,300.
12 – Partial payment of accounts, P10,000
15 – Paid the following expenses:
Diesoline and Oil P 6,800
Repairs and Maintenance 4,000
19 – Rendered trucking services to the following customers.
Cash P 20,000
On account 17,000
P 37,000
=====
21 – Bought a second-hand truck, P950,000. Paid P300,000 down payment and issued a note
for the balance of P650,000 payable during the year.
23 – Rendered trucking services for cash, P20,000.
25 – Partial collection of the account from the customer, P10,000.
27 – The shop clerk issued P3,000 cost of spare parts from inventory for the repair of the
truck (Repairs and Maintenance).
28 – The shop clerk issued P10,000 cost of tire and tube inventory for use by trucks (Repairs
and Maintenance).
29 – Rendered trucking services for cash, P35,000.
30 - Rendered trucking services on account, P35,000.
31 – Paid salaries for the month of January 2014, P35,000.
- Paid light and water expenses, P12,000.
Required:
1. Make T-accounts for the following:
Cash in Bank; Petty Cash Fund; Accounts Receivable; Tires and Tubes; Spare Parts
Inventories; Hauling Trucks; Accounts Payable; Notes Payable; L. Bartolome, Capital; L.
Bartolome, Drawing; Trucking Income; Taxes and Licenses; Diesoline and Oil; Repairs
and Maintenance and Utilities Expense.
2. Enter directly to the individual T-accounts, the beginning balances as well as the transactions for
the month of January. (Do not journalize)
3. Group all the accounts with debit and credit balances. Make a total and try to see if the debit will
equal to the credit.
4. Extract the basic accounting equation.
 EXERCISE 5 – 3

Mrs. Elenita Dedumo, CPA is the accountant of Tagum Machine Shop and has made a list
comprising of balance of accounts for the fiscal year ended June 30, 2014.

Cash in Bank P 860,000

Accounts Receivable 75,000
Machine 2,820,000
Acc. Depreciation 380,000
Accounts Payable 490,000
Fely Ardina, Capital 2,885,000

The transactions for the month of July 2014 were as follows:

July 1- Made an additional investment, cash of P20,000 and deposited it to the bank.
4- Rendered services to the customers:
Cash P30,000
On credit 40,000
P70,000
=====
5- Bought various shop supplies inventory on account, P10,000.
9- Rendered services to customers for cash, P35,000.
12 - Received cash P5,000 for services that has to be rendered yet to Footprints Printing
Press.
14 - F. Ardina withdrew cash of P15,000.
15 - Paid taxes and licenses, P6,800.
19 - Rendered service on account, P15,000.
24 - Rendered service for cash, P25,000.
26 - Cash advanced by employees deductible against payroll, P10,000.
29 - Paid utilities expense, P20,000.
30 - Rendered service to Footprints Press, P15,000 and received cash of P10,000 after
applying its deposit of P5,000 on July 12.

Service Income P 15,000

Less: Deposit 5,000
Balance P 10,000
======
31 - Paid salaries of mechanics and helpers, P50,000.

Required:
1. Make a formal opening journal entry in a 2 – column General Journal with proper
arrangement of accounts.
2. Create the following T – accounts:

Cash in Bank; Accounts Receivable; Supplies Inventory; Advances to

Employees; Machine; Accumulated Depreciation; Unearned Service Income;
Accounts Payable; Fely Ardina, Capital; Fely Ardina, Drawing; Shop Income;
Salaries Expense and Taxes and Licenses.
3. Make postings to the T-accounts you have created.
4. Total the accounts posted in the T-accounts and try to see if the debit will equal with the
credit or the two accounts will be in-balance.
5. Extract the basic accounting equation.

Multiple Choice – B

1. A company buys a P30,000 equipment on credit. This transaction will affect the –
a. Income Statement only c. both the Income Statement and Balance Sheet
b. Balance Sheet only d. no effect on both statement
2. A collection from customer’s account may result to a –
a. credit, accounts receivable c. credit, cash
b. debit, account receivable d. none of these

3. Withdrawal of cash by the owner may result to –

a. owner’ capital debit c. owner’s drawing debit
b. cash account debit d. owner’s capital credit

4. Payment to supplier’s account may result to –

a. debit to payable account c. debit to cash account
b. debit receivable account d. debit to supplier’s account

5. When services are rendered for cash –

a. cash will increase c. no effect in cash
b. cash will decrease d. service income will decrease

6. A P100,000 cost of machine was purchased on account, gave a P20,000 down payment and a note
was issued for a balance. The credit entry will include –
a. cash, P20,000 and accounts payable, P80,000 c. cash, P20,000 and discount, P80,000
b. cash, P20,000 and notes payable, P80,000 d. cash, P20,000 and machine, P80,000

7. An account to be debited should be firstly determined in recording transactions. Which of the

following should come first?
a. cash, when the balance decreases c. accounts receivable, when the balance decreases
b. accounts payable, when the balance increases d. rent expense, when the balance increases

8. When payment is made on supplies inventory previously purchased on account, the credit is –
a. supplies inventory c. cash
b. accounts payable d. none of the above

9. Unearned Income is recorded by companies that –

a. pay money in advance before performance of service
b. receive money in advance before performance of service
c. pay money after performance of service
d. none of these

10. When supplies inventory account is debited instead of supplies expense account, the result would
be –
a. asset is overstated and expense is understated
b. asset is understated and expense is overstated
c. no effect in asset and expense is understated
d. no effect in expense and asset is overstated

11. What functions to general ledger served in the accounting process?

a. summarizing c. journalizing
b. classifying d. interpreting

12. If a person wants to know the balances of a certain account, he should refer to the –
a. book of original entry c. book of accounts
b. book of final entry d. none of these

13. If the total of the debit entries exceeds to the total of the credit entries after footing the account-
a. the account is said to be in-balance c. the account is said to be out of balance
b. the account is said to be a credit balance d. the account is said to be in a debit balance

14. If the total of a credit entries exceed the total of the debit entries after footing the account –
a. the account is said to be in-balance c. the account is said to be out of balance
b. the account is said to in a credit balance d. the account is said to be in a debit balance
15. A trial balance will record –
a. the account balance of the general ledger
b. accounts with zero balances in the ledger
c. the Balance Sheet Accounts
d. the Income Statements Accounts

EXERCISE 6 – 1
Posting to the Ledger and Preparation of a Trial Balance

The following were the journal entries recorded in the General Journal of Mr. Elizardo Sintos, an
operator of a transportation business. (Explanations are intentionally omitted).

March 2 - Cash on Hand P 60,000

Jeepneys (2 units) 450,000
Sintos, Capital P 510,000

3- Prepaid Insurance 4,500

Cash on Hand 4,500

5- Taxes and Licenses 3,500

Cash on Hand 3,500

8- Repairs and Maintenance 1,350

Battery Rental Expense 600
Cash on Hand 1,950

10 - Cash on Hand 5,100

Rental Income 5,100

14 - Jeep Supplies Expense 3,880

Account Payable 3,880

17 - Cash on Hand 4,800

Rental Income 4,800

18 - Vulcanizing Expense 1,120

Cash on Hand 1,120

20 - Sintos, Drawing 2,000

Cash on Hand 2,000

28 - Cash on Hand 4,400

Rental Income 4,400

29 - Accounts Payable 2,550

Cash on Hand 2,550

Required:
1. Prepare T-account for each of the following:
Cash on Hand; Prepaid Insurance; Jeepneys; Accounts Payable; Sintos, Capital;
Sintos, Drawing; Rental Income; Battery Rental Expense; Jeepney Supplies Expense;
Vulcanizing Expense; Taxes and Licenses and Repairs and Maintenance.
2. Foot the T-accounts.
3. Prepare a Trial Balance
 EXERCISE 6 – 2
Journalizing, Posting and Trial Balance Preparation

Allen Monta opens a laundry shop business in Valencia City. The following were the transactions for
the first month of operation:

July 1- Opened an account with Union Bank, P350,000.

2- Acquired Laundry Equipment costing P75,000, paying cash of P25,000 and issued a
note for the balance.
5- Bought a second-hand delivery van on account, P65,000.
9- Bought laundry supplies for cash, P25,000.
15 - Rendered laundry services to various hotels in the city and received cash, P30,000 and
on account, P15,000.
17 - Paid light and water expense, P6,000. (utilities expense)
19 - Full payment of laundry equipment, P25,000.
21 - Withdraw cash of P5,000 for her personal use.
22 - Billed a customer for services rendered, P25,000.
25 - Paid rental for the month, P4,000.
28 - Collected P10,000 from customer’s account of July 15.
31 - Paid salaries for the month, P8,000.
31 - Paid telephone bills, P4,000
31 - Received cash P15,000 but services has to be rendered yet.

Required:
1. Prepare a journal entry using a 2-column general journal. Use the following list of account titles
and prepare T-account for each.

Cash in Bank; Accounts Receivable; Laundry Supplies Inventory; Laundry Equipment;

Delivery Van; Accounts Payable; Notes Payable; Unearned Laundry Revenue; A. Monta,
Capital; A. Monta, Drawing; Laundry Revenue; Rent Expense; Salaries Expense;
Telephone Expense and Utilities Expense.
2. Post the entries to the T-account and foot.
3. Prepare a Trial Balance.

EXERCISE 6 – 3
Journalizing, Posting and Trial Balance Preparation

Atty. Richard T. Opinion opens a modern barbershop in General Santos City under the business name
of Macho Barber Shop. The completed transactions for the first month of operations are all to be
recorded in the General Journal based on the following Chart of Accounts.

Assets Liabilities and Owner’s Equity

Cash in Bank Accounts Payable

Petty Cash Fund R. Opinion, Capital
Accounts Receivable R. Opinion, Drawing
Shop Supplies Inventory Service Income
Barber Shop Equipment Rent Expense
Shop Furniture and Fixtures Salaries Expense
Taxes and Licenses

April 1- Atty. Opinion deposited P800,000 with Land Bank of the Philippines which he later
withdrew P 5,000 for petty cash fund established for small and petty expenses.
3- Purchased air-conditioning units and barber’s chairs worth P500,000 paying P300,000
as down payment and the balance payable on June 15.
4- Purchased mirrors, various furniture and frames on account from Mayette Corporal,
P130,000.

Purchased barber shop supplies such as talcum powder, alcohol, cotton, soap, towels,
cloth and other toiletries on account from Lynn Facturan, P35,000.
5- Paid building rental, P2,500. Cash was taken from petty cash fund.
6- Withdrew the amount of P10,500 from the bank to pay for the business permits and other
government dues.
12 - Income for the week:
Cash Basis P 50,000
On Account 3,500
18 - Withdrew the amount of P10,000 from the bank to pay for personal use of Atty. Opinion.
19 - Income for the week:
Cash Basis P 65,000
On Account 4,000
20 - Withdrew the amount of P35,000 from the bank to pay the account with Lynn Facturan.
21 - Additional investment of Atty. Opinion, P100,000 in the form of cash deposit to Land Bank of
the Philippines.
25 - Collected the amount of P3,500 for services rendered on April 12.
26 - Income for the week:
Cash Basis P 45,000
On Account 10,000
29 - Withdrew the amount of P65,000 from the bank in partial payment of account to Mayette
Corporal.

Required:
1. Create T-account (instead of General Ledger) based on the given chart.
2. Make direct postings to the T-account all the necessary entries without using a journal.
3. Foot the T-account.
4. Prepare trial balance.

EXERCISE 6 – 4
Journalizing, Posting and Trial Balance Preparation

Engr. Eliseo D. Diola II was engaged in an electrical installation business. It was already his second
year of operation and all the account balances at the beginning of January 1, 2014 are shown as
follows:

Cash in Bank 980,000

Accounts Receivable 210,000
Electrical Supplies Inventory 70,000
Electrical Equipment Device 750,000
Accounts Payable 80,000
Unearned Installation Income 50,000
E. Diola III, Capital 1,880,000

Jan. 2- Engr. Diola withdrew P50,000 from his bank account for his personal use.
6- Received P30,000 from Josephine Rosete representing her advance payment for
electrical installation to be rendered in a later date.
8- Partial collection of account from various clients, P140,000.
10 - Purchase various electrical supplies on account from Christy Sionosa, P10,000.
13 - Partial payment of accounts to various suppliers, P55,000.
15 - Rendered electrical installation service on account to Edmon Biogan, P151,000.
20 - Rendered electrical installation service to Emma Gatmaitan, P50,000 which she already
have paid in advance last month. (see balances of accounts)
23 - Partial collection from Edmon Biongan’s account, P6,000.
26 - Partial payment of accounts to Christy Sionosa, P2,000
27 - Paid the city government for business permit’s, etc., P10,000
31 - Paid salaries to engineering staff, P47,000.

Required:
1. Journalize the above transactions using a General Journal
2. Post the entries to the General Ledger (Use T-account)
3. Foot and prepare a trial balance.
 EXERCISE 6 – 5
Trial Balance Preparation

The following account balances were taken from the General Ledger of Kareen Leon owner and
manager of Baguio Bowling Lanes:

Assets Income

Cash in Bank P 750,000 Bowling Income P192,850

Petty Cash Fund 1,000 Miscellaneous Income 11,325
Accounts Receivable 10,000
Prepaid Rent 15,000 Expenses
Prepaid Insurance 8,000
Furniture and Fixtures 50,000 Salaries Expense 12,000
Bowling Equipment 965,000 Supplies Expense 36,000
Liabilities Taxes and Licenses 7,500
Utilities Expense 31,050
Accounts Payable P 56,734

Owner’s Equity
K. Leon, Capital P1,632,641
K. Leon, Withdrawal 8,000

Required:

1. From the given account balances above, prepare a Trial Balance.

2. Extract the accounting equation, A=L+OE.