JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL

FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 1
 Introduction

This is an introductory course in accounting, business, and management data analysis that will develop
students’ appreciation of accounting as a language of business and an understanding of basic accounting concepts and
principles that will help them analyze business transactions.

This will highlight key concepts and identify the essential questions, show the big picture, connect and/or
review prerequisite knowledge, clearly communicate learning competencies and objectives and motivate through
applications and connections to real-life.

Welcome! You are now part of the class taking up Fundamentals of Accountancy, Business and Management
(ABM) 1. Since accounting is the “language of business”, every individual who aspires to be a businessman, accountant,
or manager, must understand these basic concepts including the different forms and type of businesses.

The primary concern of this module is to be able to teach Fundamentals of ABM1 effectively using
developmentally appropriate classroom practices. This module will help you understand and interpret certain issues
affecting business transactions. It covers important topics and activities that will enhance your analytical thinking skills.

This module presents a systematic program of study intended for Senior High School (SHS) students of
Fundamentals of ABM1 in the K to 12 program. It maintains a consistent link between theory and practice by providing
learning activities to illustrate and test theoretical ideas. As you go through the different lessons, you will be able to
analyze the different business transactions, users of financial information, branches of accounting, types of major
accounts, etc.

At the end of this subject, you are expected to:

1. Discuss the nature, function, and history of accounting.

2. Discuss the external and internal users of financial information.
3. Discuss the accounting concepts and principles and the accounting equation.
4. Understand the five major accounts and two major types of books of accounts.
5. Discuss the nature of business transactions, types of source or business documents, and the rules of debits and
credits.
6. Discuss the accounting cycle of a service and merchandising business.

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 2
 Table of Contents

Introduction

Table of Contents

Post-Test (Module 5)

Module 6: Business Transactions

Introduction ……………………………………………………………………………………………..……………….1

Description of Module …………………………………………………………………………….…….……………1

Objectives …………………………………………………………………………………………..……………………..2

General Instructions ………………………………………………………………………………………………….2

Pre-Test ………………………………………………………………………………………………………………………………..3

Activity 1.1 ……………………………………………………………………………………………………………………………4

Discussion

Business Transaction ……………………………………………………………….…………………………...…..5-8

Accounting Cycle……………………………...……..………………………………………………………….…..….8-10

Rules of Debit and Credit……………….………………..……………………………………………….….……..10-13

Self-Check 1.1 ……………………………………..……..…………………………………………………………………………14

Self-Check 1.2 ……………………………………..……..…………………………………………………………………………15

Activity 1.2 …………………………………………………………….……………………………………………………………..16

Points to Remember …………………………………………………………………………………..………………………..17

References …………………………………………………………………………………………………………………………...18

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 3
 Post-Test (Module 5)

Directions: Read and analyze each question about the types of major accounts. Choose the letter of the correct answer.
Write your answers on a one-fourth sheet of paper.

1. What are the two books of account?

A. Journal and ledger C. Trial balance and ledger
B. Journal and trial balance D. None of the choices
2. What type of book is a bill payable book?
A. Journal C. Ledger
B. Principal book D. Memorandum book
3. What is the alternative name for a sales journal?
A. Sales day book C. Sales ledger
B. Sales invoice D. Daily sales
4. What account title should be debited when a customer returns goods?
A. Return inward account C. Goods account
B. Return outward D. Accounts Receivable
5. Which of the following is not a book of prime or original entry?
A. Debtor’s account C. Purchase daybook
B. Sales daybook D. Cashbook
6. In what type of journal corrected balance of prepaid insurance at the end of the month should be recorded?
A. Cash Payments Journal C. Purchases Journal
B. Cash Receipts Journal D. General Journal
7. A bookkeeper discovers that an amount to a supplier has been wrongly entered in another supplier’s account.
Which book of original entry will the bookkeeper use when correcting this error?
A. Cash Book C. Sales day book
B. Purchase day book D. General Journal
8. Aaron sends back 50 of faulty goods to John. In which book of prime entry would John record this transaction?
A. General Journal C. Sales Journal
B. Purchase Return Journal D. Sales Return Journal
9. In what book transactions are initially recorded?
A. Book of prime C. Journal
B. Book of original entry D. All of the choices
10. Which of the following books are books of prime entry?
A. Sales day book and trial balance
B. Petty cash book and accounts receivable ledger
C. Cash book and assets register
D. Petty cash book and journal

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 4
 Module 6

BUSINESS TRANSACTIONS

Introduction

A business transaction is an economic event with a third party that is recorded in an organization's accounting
system. Such a transaction must be measurable in money. Examples of business transactions are: buying insurance from
an insurer, buying inventory from a supplier, selling goods to a customer for cash, selling goods to a customer on credit,
paying wages to employees, obtaining a loan from a lender, and selling shares to an investor. A business transaction
should always be supported by a source document. For example, the purchase of inventory from a supplier could be
supported by a purchase order, while the payment of wages to an employee could be supported by a timesheet. Some
events are not considered business transactions, such as giving a reporter a tour of company facilities, since there is no
tangible value associated with the event.

Description of Module

Lesson 6 deals with identifying business and non-business transactions, enumerating the types of business
documents, identifying the rules of debit and credit, and applying these to simple cases.

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 1
 Objectives

At the end of this module, you are expected to:

1. Analyze common business transactions using the rules of debit and credit.
2. Identify the effects of business transactions in the accounting equation.

General Instructions

At the start of the module, you are to take the pre-test to see how much background information and knowledge
you have about the topics to be discussed.

This module is self-instructional. You can read, analyze concepts and ideas presented, and reflect on them. The
Activities and Self-Check will help you assess how you progress as you go through the module.

Your answers to the Self-Check and Activities will be evaluated by your teacher. These will be part of your
formative evaluation.

The post test will be given in a separate booklet upon completion of this module. It will serve as the summative
evaluation of your performance.

Work on this module independently. Your teacher will not be around to supervise you as you go through each
lesson. It is expected that you will make the most of it.

This module shall be passed on ______________________.

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 2
 Pre-Test

Directions: Read and analyze each question about the books of accounts. Choose the letter of the correct answer. Write
your answers on a one-fourth sheet of paper.

1. What type of account/s is/are posted on a ledger?

A. Only nominal accounts are kept C. All accounts are kept
B. Only real accounts are kept D. Only personal accounts are kept
2. Which of the following statements define credit?
A. A decrease in liabilities
B. An increase in expenses
C. Entries on the right hand side
D. An increase in assets
3. Which of the following statements describe the T-account?
A. Increase and decrease to a single account in the accounting system
B. Debit and credit to a single account in the accounting system
C. Changes in specific account balances over a time period
D. All of the above describe how T-accounts are used by accountants
4. Which of the following changes will be the effect if the business disburse cash for the payment of previous
acquisition on account?
A. Increase an asset and increase a liability
B. Decrease an asset and decrease owner’s equity
C. Increase one asset and decrease another
D. Decrease an asset and decrease a liability
5. Which of the following account titles will increase if the debit side of a bank account is greater than credit side?
A. Bank loan C. Accounts Receivable
B. Bank overdraft D. Cash in bank
6. Which of the following terminologies is another term for a ledger?
A. Original entry C. Primary entry
B. Final entry D. All cash transactions
7. The process of transferring the debit and credit items from a journal to their respective account in the ledger.
This statement defines what step in the accounting cycle?
A. Balancing C. Arithmetic
B. Posting D. Entry
8. Which item will appear on the credit side of ledger account?
A. Rent expenses C. Cash received
B. Discount received D. Purchases
9. Which of the following is the correct term for the excess of debit side over credit side?
A. Liability accounts C. Credit balance
B. Debit balance D. All of the choices
10. What is the term for the left hand side of a T-account?
A. The balance C. Credit
B. Debit D. Footing

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 3
 Activity 1.1

Directions: Look and analyze the pictures carefully. Determine the correct term used in each picture by arranging the
rumbled letters. Write your answers on a one-fourth sheet of paper. (2pts each)

1 2

SIUNBSES NCRAITSONAT AXREETLN ITARNOTNSCA

3 4

NUGNCACTIO EYCCL AINANILFC OTRERP

RSECUO MUDNTEOC

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 4
 Discussion

Transaction
Business

Transactions A business transaction is an event that has some effect on the

resources of a firm or on the source of the firm’s assets. It is also an activity that
involves a change of values. Normally, a transaction involves a value received
and a value parted with.

When the transaction is between a business and an outsider, it is called External

an external transaction. An example of it is a purchase of office supplies from
Transactions
National Bookstore.

Transactions that happen within the business that do not involve

Internal
outsiders are called internal transactions. An example of it is office supplies
Transactions being used daily in the operations of the business.

The evidence of a transaction that describes the essential facts of the

transaction is the source document. Examples of source documents are receipts
of cash paid or received, checks written or received, bills sent to customer for
services performed or bills received from supplier for items purchased, cash
register tapes, sales tickets, notes given or received. Each document initiates the
Source
process of recording a transaction.
Document

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 5
 In order to generate financial reports which will be used for making decisions, business
transactions have to be analyzed, recorded and summarized. In analyzing transactions, the
suggested procedures are as follows:

a. Determine the
particular accounts b. Determine the effect
affected or involved of the transaction on
in the transaction. the accounts
There are always involved in terms of
two or more increase or
accounts involved in decrease.
every transaction.

The accounts affected or involved and the effects of the transaction on the said accounts are illustrated as
follows:

1. Mr. John Lloyd Ruiz started his own business by investing P500,000 cash.

Analysis of the above transaction:

Accounts affected Effect

Cash Increase
J. Ruiz, Capital Increase

The business received cash so the account cash will increase. The amount received by the business represent
investment by the owner, so the other account affected is John Lloyd Ruiz, Capital which will also increase.

Note: Transactions are to be analyzed from the point of view of the business.

2. Purchased for cash office supplies worth P5,000.

Office Supplies Increase

Cash Decrease

Since office supplies were purchased by the firm, its office supplies will increase. The payment of cash will
have an effect of decreasing cash.

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 6
 3. Return office supplies because of defects receiving a cash refund.

Office Supplies Decrease

Cash Increase

The return of office supplies will result to decrease in the office supplies of the company. The cash refund
received will increase the account cash.

4. Purchased office equipment on account.

Office Equipment Increase

Accounts Payable Increase

The purchase of office equipment will have an effect of increasing the account office equipment. Since the
office equipment was purchased on account (on credit), the liability account, Account Payable will also increase.

5. Issued check in payment for the office equipment previously purchased on

account.

Accounts Payable Decrease

Cash Decrease

The liability, Accounts Payable was paid so it will decrease. Likewise, the account Cash will also decrease.

6. Paid office rental for the month.

Rent Expense Increase

Cash Decrease

The payment was for office rental, so it is to be charged to the account Rent Expense. Every time an expense
is paid, the particular expense account increases while the account cash decreases.

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 7
 7. Mr. John Lloyd, the owner, withdrew cash from the business for his personal use.

J. Ruiz, Drawing Increase

Cash Decrease

In a proprietorship form of business organization, the owner is usually the one managing the firm using all
his/her efforts, time and resources in running the business. There are instances, wherein the owner withdraws cash
and or non-cash asset like merchandise from the business for personal use. Such withdrawals are charged to the owner’s
drawing account. Since cash was taken from the business, cash will decrease.

8. Received cash payments from clients for services rendered to them by the
business.

Cash Increase
Service Revenue Increase

A service business earned its revenue/income from rendering services to customers or clients. Once services
have been rendered whether for cash or on account, revenue is considered earned or realized. Thus, revenue increases.

9. Rendered services to clients on account.

Accounts Receivable Increase

Service Revenue Increase

The company will have a receivable from the clients to whom services were rendered on account. Hence, the
Accounts Receivable of the company will increase.

10. Collected a receivable from a client.

Cash Increase
Accounts Receivable Decrease

Since cash is received by the company, cash will increase. The collection of receivable decreases the
company’s receivable account.

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 8
 The accounting process or the accounting cycle consists of the sequence steps that must be followed within
the accounting period. In order, these are follows:

1. Analyzing business transactions by examining the source documents

2. Journalizing
3. Posting
4. Preparing a trial balance
5. Gathering of necessary adjustment data
6. Preparing a worksheet
7. Preparing the financial statements
8. Journalizing and posting the adjusting entries
9. Journalizing and posting the closing entries
10. Preparing the post-closing trial balance
11. Preparing the reversing entries

izing Journalizing is the process of recording business

transactions in the book of original entry called the journal.
Journal is called the book of original entry because it is where
transactions are first recorded. Transactions are recorded in
the journal in chronological order, that is, according to the
transactions date of occurrence.

Entry
Double-entry bookkeeping is a method of recording business transactions which recognizes the dual
effect of a transaction. This means that, for every value received, there is a corresponding value parted with or
given up. In double-entry bookkeeping, each transaction is recorded by debiting and crediting accounts. For every
debt entry, there is a corresponding credit entry with equal amount.

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 9
 An account is a record of each asset, liability, owner’s equity,
revenue and expense items in which the effects of business
transactions are recorded. Each element of the financial statements is
given specific account title.

A T-account is a very useful tool that is used for illustrations, analyzing transactions and in problem
solving. It is called T-account because it resembles big letter T. It appears as follows:

Title of the account

Debit Credit

(left side) (right side)

of and
The words debit and credit came from the Latin words debere (meaning “to owe”) and credere (meaning
“to trust or believe”). Debit is abbreviated as Dr. and credit as Cr. In accounting, the increase or decrease in an
account is being made by means of debit and credit.

When an account is debited, it does not mean that such account is increased, because debit may increase
or decrease the balance of an account. Likewise, when an account is credit it does not mean that such account is
decreased, because credit may also increase or decrease the balance of an account.

To debit an account also mean to charge the account.

The account or accounts to be debited and credited can be determined easily by applying the rules of debit
and credit. Generally, debit signifies increase in assets, expenses and drawing whereas, credit signifies increase in
liabilities, capital and revenues. On the other hand, debit signifies decrease in liabilities, capital and revenues,
whereas credit signifies decrease in assets, expenses, and drawing.

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 10
Stated differently,

Debit signifies: Credit signifies:

Increase in Assets Decrease in Assets

Decrease in Liabilities Increase in Liabilities
Decrease in Capital Increase in Capital
Increase in Drawing Decrease in Drawing
Decrease in Revenue Increase in Revenue
Increase in Expense Decrease in Expense

The application of the rules of debit and credit in determining the account or accounts to be debited and
credited are illustrated as follows:

Atty. Alex Flores, decided to start his practice of law by establishing his own law office. Following are
the transactions of the law firm during June, its first month of operation.

The accounts affected and whether it is to be debited or credited are as follows:

June 1 – Cash of P200,000 was received from Atty. Flores, the owner as his initial
investment in his law firm.

Debit – Cash
Credit – Alex Flores, Capital

The receipt of cash by the company will increase its asset cash, therefore, cash is to be debited. Alex Flores,
Capital is to be credited to record the increase in the capital account of the business.

2 – Purchased office supplies for cash, P5,000.

Debit – Office Supplies

Credit – Cash

The purchased of office supplies will increase the asset office supplies, so it is to be debited. Cash is to be
credited because the payment will cause cash to decrease.

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 11
 3 – Purchased office equipment worth P50,000. Paid P10,000 cash as down payment
and signed a promissory note for the balance.

Debit – Office Equipment

Credit – Cash and Notes Payable

The asset office equipment will increase so it has to be debited. The office equipment was not paid in full so
the company will have a liability for the unpaid balance. Since the liability is supported by a promissory note, the account
to be credited is Notes Payable, Cash is also to be credited because the down payment will cause cash to decrease.

4 – Issued check in payment for the promissory note issued, P40,000.

Debit – Notes Payable

Credit – Cash

The payment of a liability will cause liability to decrease. So, the liability account, Notes Payable is to be
debited. Every time the company pay or disburse cash, the account Cash is credited to reflect the decrease in cash.

5 – Received P50,000 cash from clients for services rendered for cash.

Debit – Cash
Credit – Service Revenue

The receipt of cash by the business is always recorded by debiting the account cash, whereas, the earning of
revenue is always recorded by crediting the revenue account.

6 – Billed a client for services rendered on account, P30,000.

Debit – Accounts Receivable

Credit – Service Revenue

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BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
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 The company will have a receivable from the client to whom services were rendered on account. Therefore,
Accounts Receivable is to be debited. Again, for a service business, revenue is considered earned or realized once
services have been rendered whether for cash or on account. That’s why, the revenue account Service Revenue is to be
credited.

7 – Received payment from the client to whom services were previously rendered on
account.

Debit – Cash
Credit – Accounts Receivable

The collection of a receivable will decrease the receivable account, so it is to be credited.

8 – The owner withdrew P10,000 cash from the business for personal use.

Debit – Alex Flores, Drawing

Credit – Cash

Cash taken by the owner for personal use is to be charged to the owner’s drawing account.

9 – Paid office rent for the month, P8,000.

Debit – Rent Expense

Credit – Cash

The payment for rental will increase the balance of the Rent Expense account, so it is to be debited.

NOTE: For easier understanding of the debit and credit entries, additional hints are given as follows:

1. If there are only two accounts affected in the transaction, one is to be debited and the other one is to be
credited. The two accounts cannot be both debited or credited.
2. Apply the concept of value received and value given away.

Let’s say in the transaction, purchased office supplies for cash, the value received is Office Supplies, so it
is the account to be debited. The value given away is Cash, so it is the account to be credited.

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 13
 Self-Check 1.1

Directions: On a one-fourth sheet of paper, write the letter of the correct answer that describe
each transaction as to:

A. Increase in one asset, decrease in another asset

B. Increase in an asset, increase in liability
C. Increase in an asset, increase in capital
D. Decrease in an asset, decrease in liability
E. Decrease in an asset, decrease in capital
F. Increase in liability, decrease in capital

1. The owner invests cash to the business.

2. Received cash for providing services to clients.
3. Paid employee’s salaries.
4. Issued check for equipment purchased for cash.
5. The owner of the firm took out the assets of the business for personal use.
6. Performed services to clients on account.
7. Received payment from clients previously billed for services rendered on account.
8. Purchased supplies on account.
9. Issued check in payment for supplies purchased on account.
10. Billed customers for services rendered on account.
11. Paid Meralco bill for the light and power consumed for the month.
12. Received a bill from PLDT but payment is to be made next month.
13. The owner invested additional cash to the business.
14. Rendered services to clients receiving a promissory note.
15. The owner withdrew cash for personal use.

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 14
 Self-Check 1.2

Directions: For each of the following accounts, state in column A the classification of the account
(whether the account is an asset, liability, capital, revenue, or expense), in column B if debit or
credit for increase in the account, in column C if debit or credit for decrease, and in column D, the
normal balance of the account. The first item is done for you. Write your answers on a one-half
crosswise.

Column A Column B Column C Column D

Account Titles CLASSIFICATION INCREASE DECREASE NORMAL
BALANCE
Cash Asset Debit Credit Debit

1. Utilities Expense

2. Accounts Payable

3. Carl Calma, Drawing

4. Commission Income

5. Equipment

6. Insurance Expense

7. Prepaid Rent

8. Supplies

9. Interest Receivable

10. Salaries Payable

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 15
 Activity 1.2

Directions: For each of the following transactions, state the account/s to be debited and the
account/s to be credited. The first transaction is done for you. Write your answers on a one whole
sheet of paper.

BUSINESS TRANSACTIONS DEBIT CREDIT

Received cash for services rendered. Cash Service Revenue
1. Received cash investment from Leah
Reyes, the owner of the firm.
2. Paid cash for advertising start of the
business.
3. Bought office supplies for cash.
4. Billed clients for services rendered on
account.
5. Purchased equipment on account.
6. Paid the assistant’s salary.
7. Received a check from a customer on
account.
8. Paid creditors on account.
9. The owner withdrew cash for personal
use.
10. Paid office rent for the month.
11. Purchased additional office supplies on
account.
12. Returned portion of office supplies
purchased in number 11.
13. Borrowed money from a finance company
issuing a promissory note.
14. The owner transferred her personal
computer (equipment) for office use.
15. Issued check in payment for the
promissory note issued.

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BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
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AND 1 1
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 Activity 1.2
Points to Remember

 External transactions involve the trading of goods and services with money. Therefore, it can
be said that any transaction that is entered into by two persons or two organizations with one
buying and the other one selling is considered an external transaction. Example: If Company A
buys raw materials for its production from Company B, then this is called an external
transaction.

 Internal transactions don’t involve any sales but rather other processes within the
organization. This may include computing the salary of the employees and estimating the
depreciation value of a certain asset.

 Cash transactions are the most common forms of transactions, which refer to those that are
dealt with cash. For example, if a company purchases office supplies and pays for them with
cash, a debit card, or a check, then that is a cash transaction.

 Non-cash transactions are unrelated to transactions that specify if cash’s been paid or if it will
be paid in the future. For example, if Company A purchases a machine from Company B and
sees that it is defective, returning it will not entail any cash spent, so it falls under non-cash
transactions. In other words, transactions that are not cash or credit are non-cash transactions.

 Credit transactions are deferred cash transactions because payment is promised and
completed at a future date. Companies often extend credit terms for payment, such as 30 days,
60 days, or 90 days, depending on the product or service being sold or industry norms.

 Business transactions are everyday transactions that keep the business running, such as sales
and purchases, rent for office space, advertisements, and other expenses.

 Non-business transactions are transactions that don’t involve a sale or purchase but may
involve donations and social responsibility.

 Personal transactions are those that are performed for personal purposes such as birthday
expenditures.

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 17
References

Anastacio, Ma. Flordeliza. Fundamentals of Financial Management (with Industry Based Perspective).( Manila: Rex Book
Store, 2011).

Gilbertson, Claudia. Fundamentals of Accounting. 8th ed. (Australia: Cengage Learning, 2010).

Padillo, Nicanor, Jr. Financial Statements Preparation, Analysis and Interpretation. (Manila: GIC Enterprises, 2011).

Pefianco, Erlinda C. The Accounting Process: Principles and Problems. (Makati: Goodwill Trading, 1996).

Young, Felina C. Principles of Marketing. (Manila: Rex Book Store, 2008).

Prepared by: Checked by:

MARY CECILLE S. QUIATCHON MARILOU C. MENDOZA, LPT

Subject Teacher SHS Module Coordinator

AIMIE O. ALCANTARA, LPT

SHS Head Teacher

Recommending Approval: Approved by:

NERISSA S. DELOS REYES, MAEd, SMRIEdr DR. RAMON E. WOO, JR., CPA, DFRIEdr
VP/ Basic Education Principal Dean of Studies

Noted by:

DR. ROSALINA S. ANDAYA, Ed. R., DFRIEdr

President

JOHN PAUL COLLEGE CORP.

BASIC EDUCATION DEPARTMENT – SENIOR HIGH SCHOOL
FUNDAMENTALS OF ACCOUNTANCY,
FUNDAMENTALS OF ACCOUNTANCY,BUSINESS AND
BUSINESS MANAGEMENT
AND 1 1
MANAGEMENT 18