ACCOUNTING 1

The effects of the Business Transactions in the Asset, Liability and

Owner’s Equity
ILLUSTRATIONS:
INCREASE IN AN ASSET AND INCREASE IN LIABILITY
July 1 Purchase on account one (1) unit of laptop, Php65,000.00 from Thinking Tools, Inc. for use in the business.
ANALYSIS:
The value we received is a thing of value (the laptop) which increases an asset of the business.
As a result, the Office Equipment account should be increased.
The value we parted is our promise to pay the amount (on account-is an accounting term which denotes an
oral promise to pay), which increases a liability of the business.
To JOURNALIZED THE TRANSACTION, we must debit, Office Equipment-Laptop with Php65,000.00 for
the value received and Credit Accounts Payable (Thinking Tools Inc.) for the value parted.

Date Particulars PR Debit Credit

July 1 Office Equipment-Laptop Php65,000.00
Accounts Payable (Thinking Tools Inc.) Php65,000.00
Purchase Laptop on Account
DECREASE IN A LIABILITY AND DECREASE IN ASSET
July 2 Paid cash, Php2,500.00 to Exprints Supply in full payment of account.
ANALYSIS:
The value we received is the cancellation of our oral promise to pay, which decreases a liability of the
business. Therefore, the Accounts payable (liability account) should be decreased by Php2,500.00
The value we parted with a thing of value—cash , which decreases an asset account of the business.
To JOURNALIZED THE TRANSACTION, we must debit, Accounts Payable with Php2,500.00 for the value
received and Credit Cash for the value parted.

Date Particulars PR Debit Credit

July 2 Accounts Payable (Exprints Supply) Php2,500.00
Cash Php2,500.00
In full payment of an account
INCREASE IN ASSET AND DECREASE IN ANOTHER ASSET
July 3 Received cash, Php8,500.00, from Juan Dela Cruz for full payment in the services rendered.
ANALYSIS:
The value we received is a thing of value—cash , which increases an asset account of the business. So, the
cash account should be increased by Php8,500.00
The value we parted with is the cancellation of the oral promise to pay of a debtor, Juan Dela Cruz (Accounts
Receivable-an asset account), which decreases another asset of the business. For this reason, the Accounts
receivable should be decreased by Php8,500.00
To JOURNALIZED THE TRANSACTION, we must debit, Cash with Php8,500.00 for the value received and
Credit Accounts receivable for the value parted.

Date Particulars PR Debit Credit

July 3 Cash Php8,500.00
Accounts Receivable (Juan Dela Cruz) Php8,500.00
In full payment of services rendered an
account
INCREASE IN ASSET AND INCREASE IN OWNER’S EQUITY
July 4 Received cash, Php100,00.00, from Eunice Tongco, the owner an additional capital for the business.
ANALYSIS:
The value we received is a thing of value—cash , which increases an asset account of the business. So, the
cash account should be increased by Php100,000.00
The value we parted with is our implied promise to safeguard the owner’s equity, which increase
the Capital Account. Consequently, the capital account should be increased by Php100,000.00
To JOURNALIZED THE TRANSACTION, we must debit, Cash with Php100,000.00 for the value received
and Credit Eunice Tongco, Capital for the value parted.

Date Particulars PR Debit Credit

July 4 Cash Php100,000.00
Eunice Tongco, Capital Php100,000.00
Additional investment
USING THE ILLUSTRATIONS
ABOVE, JOURNALIZE THE
FOLLOWING
TRANSACTIONS
INCREASE IN ASSET AND INCREASE IN OWNER’S EQUITY
February 1 Mr. Ng opened Milk Tea Station by investing Php250,000.00 cash.
ANALYSIS:
The value we received cash , which increases an asset account of the business. So, the cash account should be
increased by Php250,000.00
The value we parted with is our implied promise to safeguard the owner’s equity, which increase
the Capital Account. Consequently, the capital account should be increased by Php250,000.00
To JOURNALIZED THE TRANSACTION, we must debit, Cash with Php250,000.00 for the value received
and Credit Mr. Ng, Capital for the value parted.

Date Particulars PR Debit Credit

Feb. 1 Cash 250, 000
Mr. Ng 250, 000
Investment
INCREASE IN AN ASSET AND INCREASE IN LIABILITY
February 2 Mr. Ng bought equipment's for the business amounting to Php125,000.00 .
ANALYSIS:
The value we received is a thing of value (bought equipment’s) which increases an asset of the business. As a
result, the Office Equipment account should be increased.
The value we parted is our promise to pay the amount (on account-is an accounting term which denotes an
oral promise to pay), which increases a liability of the business.
To JOURNALIZED THE TRANSACTION, we must debit, Office Equipment with Php125,000.00 for the value
received and Credit Mr. Ng for the value parted.

Date Particulars PR Debit Credit

Feb. 2 Office
To JOURNALIZED THEEquipment 125,000
TRANSACTION, _______________________________________________
Mr. Ng 125,000
Bought Equiptment
INCREASE IN AN ASSET AND INCREASE IN LIABILITY
February 3 Purchased supplies on account at Franzi General Merchandise worth Php35,000.00.
ANALYSIS:
The value we received is a thing of value (purchased supplies) which increases an asset of the business.
As a result, the purchased supplies on account should be increased.
The value we parted is our promise to pay the amount (on account-is an accounting term which denotes an oral
promise to pay), which increases a liability of the business.
To JOURNALIZED THE TRANSACTION, we must debit, Purchases with Php35,000.00 for the value received
and Cash for the value parted.

Date Particulars PR Debit Credit

Feb. 3 Purchases 35,000
Cash 35,000
Purchased Supplies on Cash
INCREASE IN AN ASSET AND INCREASE IN LIABILITY
February 4 Bought tables and chairs worth Php 50,000.00 cash.
ANALYSIS:
The value we received is a thing of value (Tables and Chairs) which increases an asset of the business.
As a result, the Furniture account should be increased.
The value we parted is our promise to pay the amount (on account-is an accounting term which denotes an
oral promise to pay), which increases a liability of the business.
To JOURNALIZED THE TRANSACTION, we must debit, Furniture with Php50,000.00 for the value received
and Credit Cash for the value parted.

Date Particulars PR Debit Credit

Feb 4 Furniture 50,000
Cash 50,000
Bought Furniture for cash
DECREASE IN A LIABILITY AND DECREASE IN ASSET
February 7 Paid Franci Merchandise for the supplies bought on account worth Php35,000.00.
ANALYSIS:
The value we received is the cancellation of our oral promise to pay, which decreases a liability of the
business. Therefore, the Accounts payable (liability account) should be decreased by Php35,000.00
The value we parted with a thing of value—cash , which decreases an asset account of the business.
To JOURNALIZED THE TRANSACTION,we must debit, Account Payable_Franci Merchandise
with Php35,000.00 for the value received and Credit Cash for the value parted.

Date Particulars PR Debit Credit

Feb. 7 Account Payable_Franci Merchandise 35,000
Cash 35,000
Paid Credit to Franci Merchandise