RECORDING BUSINESS

TRANSACTIONS
WEEKS 3 & 4
 ACCOUNTING “IKSI-
MPLIFIED”
THE ACCOUNT

“T – account”
RECAP

A=L+E
 ACCOUNTING “IKSI-
MPLIFIED”
THE ACCOUNT

“T – account”
RECAP
“in terms of normal
balances of your accounts”
ACCOUNTING “IKSI-
MPLIFIED”
RULE OF DEBIT AND CREDIT

WHAT IS THE RULE OF DEBIT &

CREDIT?

✔ This rule also illustrates the dual

effect of business transactions, that is
at least 2 accounts must be affected
(double entry accounting system)
ACCOUNTING “IKSI-
MPLIFIED”
RULE OF DEBIT AND CREDIT

Usual Mistake on Debit and Credit:

⮚ Debit = Increase / Addition / Plus (+)

⮚ Credit = Decrease / Deduction / Minus (-)

It may be TRUE TO SOME accounts,

but NOT TRUE TO ALL.
 ACCOUNTING “IKSI-
MPLIFIED”
RULE OF DEBIT AND CREDIT

ASSETS LIABILITIES & EQUITY INCOME EXPENSES

INCREASE Debit Credit Credit Debit
DECREASE Credit Debit Debit Credit

The Rule
ACCOUNTING “IKSI-
MPLIFIED”
RULE OF DEBIT AND CREDIT

The Rule
In
Acronym
 ACCOUNTING “IKSI-
MPLIFIED”
RULE OF DEBIT AND CREDIT

Tabular CASH
ASSETS
MERCHANDISE
LIABILITY
OFFICE
EQUITY
ACCOUNTS SERRANO, (REMARKS
INVENTORIES SUPPLIES PAYABLE CAPITAL FOR EQUITY)
Analysis A 100,000 100,000 INVESTMENT
B NO EFFECT
C 5,000 5,000
D (10,000) 10,000
E NO EFFECT
F 20,000 20,000 SALES
G-1 (8,000) (8,000) SALARY
G-2 (7,000) (7,000) UTILITY
G-3 (15,000) (15,000) RENT
SUB-T. 80,000 10,000 5,000 5,000 90,000
TOTAL 95,000 95,000
 ACCOUNTING “IKSI-
MPLIFIED”
ACCOUNTING DEFINITION
Identifying Recording Classifying Summarizing Interpreting

Preparation Adjusting Financial

Closing the
Journalizing Posting of a Trial the Statement
Accounts
Balance Accounts Preparation

ACCOUNTING CYCLE
 Why is recording
called
JOURNALIZING?
Because transactions are recorded
for the first time in a JOURNAL
(a record of transactions made in
chronological order or order of occurence)
“earliest to latest”
JOURNAL: Book of Original Entry
“Journal Entries”
 ACCOUNTING “IKSI-
MPLIFIED”
DATE DESCRIPTION P.R. DEBIT CREDIT
<date of <ACCOUNT TITLE> <AMOUNT>
transaction>
<ACCOUNT TITLE> <AMOUNT>

<Description of transaction>

ENTRY
FORMAT
 ACCOUNTING “IKSI-
ILLUSTRATION:
MPLIFIED”
Mr. Serrano started a milktea business and called his store,
Sherepnitea. The following transactions occurred during the first
month of the business.

A. Invested capital amounting to Php 100,000.

B. Leased an office space from a personal friend, term of payment is
Php 15,000 every end of the month. (TO SIMPLIFY ILLUSTRATION:
No advance rental asked.)
C. Purchased office supplies on account, Php 5,000.
D. Purchased merchandise inventories for cash, Php 10,000.
E. Hired a service crew to start selling milktea.
F. Were able to sell Php 20,000 worth of milktea, in cash.
G. Paid the following expenses: Salary, Php 8,000; Utilities, Php 7,000;
Rent, Php 15,000.
 ACCOUNTING “IKSI-
MPLIFIED”
ILLUSTRATION:
Mr. Serrano started a milktea business and called his store,
Sherepnitea. The following transactions occurred during the
first month of the business.

A. Invested capital amounting to Php 100,000.

 DATE DESCRIPTION P.R. DEBIT CREDIT
A CASH 100,000
SERRANO, CAPITAL 100,000

To record initial investment by the

owner.

ACCOUNTIN
G
“IKSI-
 ACCOUNTING “IKSI-
MPLIFIED”
ILLUSTRATION:
Mr. Serrano started a milktea business and called his store,
Sherepnitea. The following transactions occurred during the
first month of the business.

A. Invested capital amounting to Php 100,000.

B. Leased an office space from a personal friend, term of
payment is Php 15,000 every end of the month. (TO
SIMPLIFY ILLUSTRATION: No advance rental asked.)
 DATE DESCRIPTION P.R. DEBIT CREDIT
A CASH 100,000
SERRANO, CAPITAL 100,000

To record initial investment by the

owner.

B NO JOURNAL ENTRY NEEDED

ACCOUNTIN
G
“IKSI-
 ACCOUNTING “IKSI-
MPLIFIED”
ILLUSTRATION:
Mr. Serrano started a milktea business and called his store,
Sherepnitea. The following transactions occurred during the
first month of the business.

A. Invested capital amounting to Php 100,000.

B. Leased an office space from a personal friend, term of
payment is Php 15,000 every end of the month. (TO
SIMPLIFY ILLUSTRATION: No advance rental asked.)
C. Purchased office supplies on account, Php 5,000.
 DATE DESCRIPTION P.R. DEBIT CREDIT
A CASH 100,000
SERRANO, CAPITAL 100,000

To record initial investment by the

owner.

B NO JOURNAL ENTRY NEEDED

C OFFICE SUPPLIES 5,000

ACCOUNTS PAYABLE 5,000
To record purchase of office
supplies on account.

ACCOUNTIN
G
“IKSI-
 ACCOUNTING “IKSI-
MPLIFIED”
ILLUSTRATION:
Mr. Serrano started a milktea business and called his store,
Sherepnitea. The following transactions occurred during the
first month of the business.

A. Invested capital amounting to Php 100,000.

B. Leased an office space from a personal friend, term of
payment is Php 15,000 every end of the month. (TO
SIMPLIFY ILLUSTRATION: No advance rental asked.)
C. Purchased office supplies on account, Php 5,000.
D. Purchased merchandise inventories for cash, Php 10,000.
 DATE DESCRIPTION P.R. DEBIT CREDIT
A CASH 100,000
SERRANO, CAPITAL 100,000

To record initial investment by the

owner.

B NO JOURNAL ENTRY NEEDED

C OFFICE SUPPLIES 5,000

ACCOUNTS PAYABLE 5,000
To record purchase of office
supplies on account.

D MERCHANDISE INVENTORY 10,000

ACCOUNTIN CASH 10,000

G
To record purchase of inventories.

“IKSI-
 ACCOUNTING “IKSI-
MPLIFIED”
ILLUSTRATION:
Mr. Serrano started a milktea business and called his store,
Sherepnitea. The following transactions occurred during the
first month of the business.

A. Invested capital amounting to Php 100,000.

B. Leased an office space from a personal friend, term of
payment is Php 15,000 every end of the month. (TO
SIMPLIFY ILLUSTRATION: No advance rental asked.)
C. Purchased office supplies on account, Php 5,000.
D. Purchased merchandise inventories for cash, Php 10,000.
E. Hired a service crew to start selling milktea.
 ACCOUNTING “IKSI-
DATE MPLIFIED”
DESCRIPTION P.R. DEBIT CREDIT
E NO JOURNAL ENTRY NEEDED
 ACCOUNTING “IKSI-
MPLIFIED”
ILLUSTRATION:
Mr. Serrano started a milktea business and called his store,
Sherepnitea. The following transactions occurred during the first
month of the business.

A. Invested capital amounting to Php 100,000.

B. Leased an office space from a personal friend, term of
payment is Php 15,000 every end of the month. (TO SIMPLIFY
ILLUSTRATION: No advance rental asked.)
C. Purchased office supplies on account, Php 5,000.
D. Purchased merchandise inventories for cash, Php 10,000.
E. Hired a service crew to start selling milktea.
F. Were able to sell Php 20,000 worth of milktea, in cash.
 ACCOUNTING “IKSI-
DATE MPLIFIED”
DESCRIPTION P.R. DEBIT CREDIT
E NO JOURNAL ENTRY NEEDED

F CASH 20,000
SALES 20,000
To record sales for the period
 ACCOUNTING “IKSI-
ILLUSTRATION:
MPLIFIED”
Mr. Serrano started a milktea business and called his store,
Sherepnitea. The following transactions occurred during the first
month of the business.

A. Invested capital amounting to Php 100,000.

B. Leased an office space from a personal friend, term of payment is
Php 15,000 every end of the month. (TO SIMPLIFY ILLUSTRATION:
No advance rental asked.)
C. Purchased office supplies on account, Php 5,000.
D. Purchased merchandise inventories for cash, Php 10,000.
E. Hired a service crew to start selling milktea.
F. Were able to sell Php 20,000 worth of milktea, in cash.
G. Paid the following expenses: Salary, Php 8,000; Utilities, Php 7,000;
Rent, Php 15,000.
 ACCOUNTING “IKSI-
DATE MPLIFIED”
DESCRIPTION P.R. DEBIT CREDIT
E NO JOURNAL ENTRY NEEDED

F CASH 20,000
SALES 20,000
To record sales for the period

G SALARIES EXPENSE 8,000

UTILITIES EXPENSE 7,000
RENT EXPENSE 15,000
CASH 30,000
To record paid expenses for the
period
 ACCOUNTING “IKSI-
MPLIFIED”
ACCOUNTING DEFINITION
Identifying Recording Classifying Summarizing Interpreting

Preparation Adjusting Financial

Closing the
Journalizing Posting of a Trial the Statement
Accounts
Balance Accounts Preparation

ACCOUNTING CYCLE
 Why is classifying
called POSTING?
Because recorded transactions
are transferred or ‘posted’
from the journal to the LEDGER
(a grouping of accounts used to classify and
summarize transactions)
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
 DATE DESCRIPTION P.R. DEBIT CREDIT
A CASH 100,000
SERRANO, CAPITAL 100,000

To record initial investment by the

owner.

ACCOUNTIN
G
“IKSI-
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
 DATE DESCRIPTION P.R. DEBIT CREDIT
A CASH 100,000
SERRANO, CAPITAL 100,000

To record initial investment by the

owner.

B NO JOURNAL ENTRY NEEDED

ACCOUNTIN
G
“IKSI-
 DATE DESCRIPTION P.R. DEBIT CREDIT
A CASH 100,000
SERRANO, CAPITAL 100,000

To record initial investment by the

owner.

B NO JOURNAL ENTRY NEEDED

C OFFICE SUPPLIES 5,000

ACCOUNTS PAYABLE 5,000
To record purchase of office
supplies on account.

ACCOUNTIN
G
“IKSI-
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
 DATE DESCRIPTION P.R. DEBIT CREDIT
A CASH 100,000
SERRANO, CAPITAL 100,000

To record initial investment by the

owner.

B NO JOURNAL ENTRY NEEDED

C OFFICE SUPPLIES 5,000

ACCOUNTS PAYABLE 5,000
To record purchase of office
supplies on account.

D MERCHANDISE INVENTORY 10,000

ACCOUNTIN CASH 10,000

G To record purchase of inventories.

“IKSI-
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
 ACCOUNTING “IKSI-
DATE MPLIFIED”
DESCRIPTION P.R. DEBIT CREDIT
E NO JOURNAL ENTRY NEEDED
 ACCOUNTING “IKSI-
DATE MPLIFIED”
DESCRIPTION P.R. DEBIT CREDIT
E NO JOURNAL ENTRY NEEDED

F CASH 20,000
SALES 20,000
To record sales for the period
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
 ACCOUNTING “IKSI-
DATE MPLIFIED”
DESCRIPTION P.R. DEBIT CREDIT
E NO JOURNAL ENTRY NEEDED

F CASH 20,000
SALES 20,000
To record sales for the period

G SALARIES EXPENSE 8,000

UTILITIES EXPENSE 7,000
RENT EXPENSE 15,000
CASH 30,000
To record paid expenses for the
period
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
 ACCOUNTING “IKSI-
MPLIFIED”
ACCOUNTING DEFINITION
Identifying Recording Classifying Summarizing Interpreting

Preparation Adjusting Financial

Closing the
Journalizing Posting of a Trial the Statement
Accounts
Balance Accounts Preparation

ACCOUNTING CYCLE
 What is a
TRIAL BALANCE?
A list of all accounts in the ledger
with their corresponding balances;

Used to test the EQUALITY

of debits and credits
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
ACCOUNTIN
G
“IKSI-
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
ACCOUNTIN
G
“IKSI-
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
ACCOUNTIN
G
“IKSI-
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
ACCOUNTIN
G
“IKSI-
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
ACCOUNTIN
G
“IKSI-
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
ACCOUNTIN
G
“IKSI-
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
ACCOUNTIN
G
“IKSI-
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
ACCOUNTIN
G
“IKSI-
ACCOUNTING “IKSI-
MPLIFIED”
POSTING
ACCOUNTIN
G
“IKSI-
ACCOUNTIN
G
“IKSI-
SOURCES
OF
ERRORS
In Recording
Business
Transactions
ACCOUNTING “IKSI-
MPLIFIED”
SOURCES OF ERRORS
 ACCOUNTING “IKSI-
MPLIFIED”
SOURCES OF ERRORS

ERROR
ERROR IN IN
RECORDI POSTIN
NG G

ERROR IN
TRIAL
BALANCE
 ACCOUNTING “IKSI-
MPLIFIED”
SOURCES OF ERRORS

ERROR IN RECORDING
• Error in amount (transplacement / slide)
• Error in amount (transpositional)
• Different amount
• Wrong account used
• Wrong debit/credit
• Unrecorded transactions
• Double entry
 ACCOUNTING “IKSI-
MPLIFIED”
SOURCES OF ERRORS

ERROR IN POSTING
• Wrong account posted
• Wrong amount posted
• Wrong side (debit/credit) posted
• Unposted transactions
• Wrong footing
• Double posting
 ACCOUNTING “IKSI-
MPLIFIED”
SOURCES OF ERRORS

ERROR IN TRIAL BALANCE

• Wrong column (debit/credit)
• Wrong amount transferred in the trial
balance
• Amount not transferred in the trial balance
• Wrong footing
• Transferred to the TB more than once
 ACCOUNTING “IKSI-
MPLIFIED”
SOURCES OF ERRORS

REMINDER:
Even when the trial balance is balance, the
accounting records may still contain errors due to:

✔ unrecorded transactions
✔ duplicate entries
✔ wrong entry (amount or account) but equal on
debit/credit
 ACCOUNTING “IKSI-
MPLIFIED”
SOURCES OF ERRORS

Illustration:
ACCOUNTING “IKSI-
MPLIFIED”
SOURCES OF ERRORS
ACCOUNTING “IKSI-
MPLIFIED”
 ACCOUNTING “IKSI-
MPLIFIED”
A. On May 9, the owner leased a store space by paying
3 months advance rental for Php 45,000. The amount
was recorded in the books as Php 4,500.
SHOULD BE JOURNAL ENTRY
May 9 Prepaid Rent 45,000
Cash 45,000
To record advance payment of rent
WHAT WAS RECORDED
May 9 Prepaid Rent 4,500
Cash 4,500
To record advance payment of rent
CORRECTION OF JOURNAL ENTRY
Prepaid Rent 40,500
Cash 40,500
To correct the recorded amount
ACCOUNTING “IKSI-
MPLIFIED”
 ACCOUNTING “IKSI-
B. On May 13, MPLIFIED”
purchased merchandise inventories on
account for Php 15,250 payable after 30 days. The
bookkeeper recorded it as Php 15,520.
SHOULD BE JOURNAL ENTRY
May 13 Merchandise Inventory 15,250
Accounts Payable 15,250
To record purchase of inventory on account
WHAT WAS RECORDED
May 13 Merchandise Inventory 15,520
Accounts Payable 15,520
To record purchase of inventory on account
CORRECTION OF JOURNAL ENTRY
Accounts Payable 270
Merchandise Inventory 270
To correct the recorded amount
ACCOUNTING “IKSI-
MPLIFIED”
 C. On May 5, the owner purchased store equipment
worth Php 200,000 by paying Php 150,000 cash and the
balance payable in 10 days. The bookkeeper forgot to
record the payment of balance on May 15.
SHOULD BE JOURNAL ENTRY
May 15 Accounts Payable 50,000
Cash 50,000
To record payment of balance on account

WHAT WAS RECORDED

May 15 NO JOURNAL ENTRY WAS RECORDED

CORRECTION OF JOURNAL ENTRY

Accounts Payable 50,000
Cash 50,000

ACCOUNTIN To record payment of balance on account

G
ACCOUNTING “IKSI-
MPLIFIED”
 ACCOUNTING “IKSI-
D. On May 19, MPLIFIED”
the store collected Php 35,000 for an
agreement to sell and delivered its products on the
24th of the month. Sales were recorded on the 19th.
SHOULD BE JOURNAL ENTRY
May 19 Cash 35,000
Unearned Service Revenue 35,000
To record advance collection of payment

WHAT WAS RECORDED

May 19 Cash 35,000
Service Revenue 35,000
To record collection of payment

CORRECTION OF JOURNAL ENTRY

CORRECTION NOT NEEDED. IT ‘SELF-CORRECTED’ ON MAY 24. HOWEVER, ON
MAY 19, IT VIOLATED THE ACCRUAL BASIS OF ACCOUNTING.
ACCOUNTING “IKSI-
MPLIFIED”
 ACCOUNTING “IKSI-
MPLIFIED”
E. On May 26, the business sold products on account,
Php 23,000. The journal entry was correct but it was
posted incorrectly in the ledger (DR to Service Revenue,
CR to Accounts Receivables).

NO ADJUSTING ENTRY NEEDED. THE ERROR IS IN

POSTING THE AMOUNTS IN THE LEDGER AND NOT IN
THE JOURNAL ENTRY.
ACCOUNTING “IKSI-
MPLIFIED”
 ACCOUNTING “IKSI-
MPLIFIED”
F. On May 27, received Meralco billing for Php 3,000
due on the 5th of the following month. The journal
entry was correct but the credit was not posted in the
ledger account.

NO ADJUSTING ENTRY NEEDED. THE ERROR IS IN

POSTING THE AMOUNTS IN THE LEDGER AND NOT IN
THE JOURNAL ENTRY.
ACCOUNTING “IKSI-
MPLIFIED”
 ACCOUNTING “IKSI-
G. On May 31,MPLIFIED”
recognized rent expense equivalent to 1
month amounting to Php 30,000.
SHOULD BE JOURNAL ENTRY
May 31 Rent Expense 15,000
Prepaid Rent 15,000
To recognize 1 month of rent expense (45,000 / 3 months)
WHAT WAS RECORDED
May 31 Rent Expense 30,000
Prepaid Rent 30,000
To recognize 1 month of rent expense
CORRECTION OF JOURNAL ENTRY
Prepaid Rent 15,000
Rent Expense 15,000
To correct the amount of rent expense recorded
ACCOUNTING “IKSI-
MPLIFIED”
ACCOUNTING “IKSI-
MPLIFIED”
ACCOUNTING “IKSI-
MPLIFIED”

* - Since the 23,000 is on the CR side, it was

deducted from the 46,000 amount of correction
** - The drawing account is in the wrong side of
the trial balance
END OF MODULE