by Prof.

WIN Ballada
120 | Basic Financial Accounting and Reporting 2025 Edition

entry, the entry is referred to as

When three or more accounts are required in a journal
a compound entry.

TRANSACTIONS ARE JOURNALIZED (Step 2)

and measured, it is recorded in the
After the transaction or event has been identified The following are
is called journalizing.
journal. The process of recording a transaction
of May. The dOUble-entry
the transactions for Weddings "R" Us during the month
system will be used.
A (for asset), L (liability) or
To understand the nature of the affected accounts, the letter
owner's equity is further
OE (owneds equity) is inserted after each entry. In addition,
classified into OE:I (income) and OE:E (expenses).

Note that the rules of double-entry system are observed in each transaction:
1. Two or more accounts are affected by each transaction.
2. The sum of the debits for every transaction equals the sum of the credits.
3. The equality of the accounting equation is always maintained.

Initial Investment (Source of Assets)

May 1 Therese Daphne G. Ballada is a social entrepreneur from the
South. She is into a lot of interesting causes. Her fine taste is
preeminent such that she is considered an authority in planning
weddings. She does not intend to "charge much". Upon
the
advice and prodding of an esteemed colleague, Ballada
decided
to organize her wedding consultancy. She invested
P250,OOOinto
this entity.

Analysis Assets increased. Owner's equity increased.

Rules Increases in assets are recorded by debits.
Increases in owner's
equity are recorded by credits.
Entry Increase in assets is recorded by a debit to cash.
owner's equity is recorded by a credit to Increase in
Ballada, Capital.

Dr,
Cash (A)
Bailada, Capital (OE) 250,000
250,000
 RecordinoBusiness Transactions | 121

gentpaidin Advance (Exchange of Assets)

Rented office space and paid two months'
May rent in advance,
P8,ooo.

Analysis Assets increased. Assets decreased.

Rules Increases in assets are recorded by debits. Decreases in assets
are recorded by credits.
Entry Increase in assets is recorded by a debit to prepaid rent.
Decrease in assets is recorded by a credit to cash.

Dr. Cr.
Prepaid Rent (A) 8,000
Cash (A) 8,000

NoteIssuedfor Cash (Source of Assets)

May 2 Therese Daphne G. Ballada issued a promissory note for a
P210,OOOloan from Metrobank. This availment will be used for
the acquisition of a service vehicle. The note carries a 20%
interest per annum. The arrangement with the bank is that both
the interest and the principal are payable in full in one year.

Analysis Assets increased. Liabilities increased.

Rules
Increases in assets are recorded by debits. Increases in liabilities
are recorded by credits.
Increase in assets is recorded by a debit to cash. Increase in
liabilities is recorded by a credit to notes payable.

Dr. Cr.
Cash (A) 210,000
Notes Payable (L) 210,000

May 2
Hired an office assistant and an account executive each with a
P7,800 monthly salary, Or, each is to receive P300 per day for the
26-day work month, No entry is necessary at this points They
started work immediately.
 Ballada
by prof. WIN
Reporting 2025 Edition
122 | Basic Financial Accounting and

of Assets)
Service Vehicle Acquired for Cash (Exchange
P420,OOO,
May 4 Acquired service vehicle for
decreased.
Analysis Assets increased. Assets debits. Decreases by credits.
recorded by
Rules Increases in assets are to service vehicle,
is recorded by a debit
Entry Increasein assets
a credit to cash.
Decrease in assets is recorded by

Dr. Cr.
420,000
Service Vehicle (A)
420,000
Cash (A)

insurance Premiums Paid (Exchange of Assets)

May 4 Paid PrudentialGuaranteeand Assurance, Inc. P14,400 for a one-
year comprehensiveinsurancecoverage on the service vehicle.

Analysis An asset increased. Another asset decreased.

Increases in assets are recorded by debits. Decreases in assets
are recorded by credits.
Entry Increase in assets is recorded by a debit to prepaid
insurance.
Decrease in assets is recorded by a credit to
cash.

Dr. Cr.
Prepaid Insurance (A)
Cash (A) 14,400
14,400

Office Equipment Acquired on Account (Exchange and

Source of Assets)
May 5 Acquiredoffice equipmentfrom Fair
and Square
P60,OOO;paying PIS,OOO in cash and Emporium for
the balance
Note: A compound entry is needed next month.
for this
transaction.
Analysis Assets increased, Assets decreased.
Rules Increases in assets are recorded by Liabilities increased.
debits.
are recordedby credits. increases Decreases in
in liabilities assets
are recorded
by
 Recording Business Transactions j 123

Increase in assets is recorded by a debit

Entry to office equipment,
Decrease in assets is recorded by a credit
to cash. Increase in
liabilities is recorded by a credit to accounts
payable.

Cr.
Office Equipment (A)
60,000
Cash (A)
15,000
Accounts Payable (L)
45,000

Purchasedon Account (Source of Assets)

Supplies
May8 Purchased supplies on credit for P18,OOOfrom San Jose
Merchandising.

Analysis Assets increased, Liabilities increased.

Rules Increases in assets are recorded by debits. Increases in liabilities
are recorded by credits.
Entry Increase in assets is recorded by a debit to supplies. Increase in
liabilities is recorded by a credit to accounts payable.

Dr. Cr.
Supplies (A) 18,000
Accounts Payable (L) 18,000

Accounts
Payable Partially Settled (Use of Assets)
May 9
Paid San Jose Merchandising PIO,OOOof the amount owed.
Analysis
Rules Assets decreased. Liabilities decreased.
Decreases in assets are recorded by credits. Decreases in
Entry liabilities are recorded by debits,
Decrease in liabilities is recorded by a debit to accounts payable.
Decrease in assets is recorded by a credit to cash.

Dr,a Cr.
Accounts Payable (L) 10,000
Cash (A) 10,000
Revenues Earned and Cash Collected (Source of Assets)
arrangements for three
May 10 Coordinated and finalized simple bridal
Services include
couples and collected fees of P8,800 per couple.
location,
prospecting and selecting the church and reception
couturier, caterer, car service, flowers, souvenirs and invitations.

Analysis Assets increased. Owner's equity increased.

Rules Increases in assets are recorded by debits. Increases in owner's
equity are recorded by credits.
Entry Increase in assets is recorded by a debit to cash. .lncrease in
owner's equity is recorded by a credit to consulting revenues.

Cr.
Cash (A) 26,400
Consulting Revenues (OE:I) 26,400

Salaries Paid (use of Assets)

May 13 Paid salaries, P6,600. The entity pays salaries every
two
Saturdays (refer to the calendar in Chapter 4).

Analysis Assets decreased. Owner's equity decreased.

Rules Decreases in assets are recorded by credits.
Decreases in owner'S
equity are recorded by debits.
Entry Decrease in owner's equity is recorded by a
debit to salaries
expense. Decrease in assets is recorded
by a credit to cash.

Dr, Cr.
Salaries Expense (OE:E)
Cash (A) 6,600
6,600

Unearned Revenues Collected (Source of Assets)

The entity is earning additional revenues
clients to friendly hotels, caterers, by referring
printers, and consulting
Received P10,000 advance fees for couturiers.
three clients
referred.
Analysis Assets increased, Liabilities increased.
 Rules Increases in assets are recorded
by debits. Increases in liabilities
are recorded by credits.
Increase in assets is recorded
by a debit to cash. Increase in
liabilities is recorded by a credit to
unearned referral revenues.

Dr.
Cash (A)
10,000
Unearned Referral Revenues (L) 10,000

Earned on Account (Source of Assets)

Revenues
May 19 Coordinated and finalized elaborate bridal arrangements for
three couples and billed fees of P12,OOOper couple. Additional
services include documents preparation, consultation with a feng
Shui expert as to the ideal wedding date for prosperity and
harmony, provision for limousine service and honeymoon trip.

Analysis Assets increased. Owner's equity increased.

Rules Increases in assets are recorded by debits. Increases in owner's
equity are recorded by credits.
Entry Increase in assets is recorded by a debit to accounts receivable.
Increase in owner's equity is recorded by a credit to consulting
revenues.

Dr. Cr.

Accounts Receivable (A) 36,000

Consulting Revenues (OE:I) 36,000

Withdrawal
of Cash by Owner (Use of Assets)
May25
Ballada withdrew P14,OOOfor personal expenses.

Assets decreased. Owner's equity decreased.

Analysis
Rules Decreases in owner's
Decreases in assets are recorded by credits.
equity are recorded by debits.
Entry a debit to Ballada,
Decrease in owner's equity is recorded by
recorded by a credit to
Withdrawals. Decrease in assets is
cash.
 Dr. Cr.
14,000
Baliada, Withdrawals (OE)
14,000
Cash (A)

Salaries Paid (Use of Assets)

May 27 Paid salaries, P7,200.

Analysis Assets decreased. Owner's equity decreased.

Rules Decreases in assets are recorded by credits. Decreases in owner's
equity are recorded by debits.
Entry Decrease in owner's equity is recorded by a debit to salaries
expense. Decrease in assets is recorded by a credit to cash.

Dr. Cr.
Salaries Expense (OE:E) 7,200
Cash (A) 7,200

Expenses Incurred but Unpaid (Exchange of Claims)

May 30 Received the ICC-BayanTel telephone bill, P 1,400.

Analysis Liabilities increased. Owner's equity decreased.

Rules Increases in liabilities are recorded by credits. Decreases in
owner's equity are recorded by debits.
Entry Decrease in owner's equity is recorded by a debit to utilities
expense. Increase in liabilities is recorded by a credit to
utilities payable.

Dr. Cr.
Utilities Expense (OE:E) 1,400
Utilities Payable (L) 1,400

Accounts Receivable Partially Collected (Exchange of Assets)

May 30 Received P24,OOOfrom two clients for services billed last May 19•
Analysis An asset increased. Another asset decreased.
Rules increases in assets are recorded by debits,
Decreases as credits.
 Business bongoctiOtiS

Increase in assets iS recorded by a debit to cash, Decrease

Entry
assets is recorded by a credit to accounts receivable,

cash (A) 24,000

Accounts Receivable (A) 24,000

toensesIncurredand Paid (Use of Assets)

May 31 Settled the electricity bill of P3,000 for the month,

Anatysis Assets decreased, Owner's equity decreased.

Rules Decreases in assets are recorded by credits. Decreases in owner's
equity are recorded by debits.
Entry Decrease in owner's equity is recorded by a debit to utilities
expense. Decrease in assets is recorded by a credit to cash,

Dr. Cr.
Utilities Expense (OE:E) 3,000
Cash (A) 3,000

LEDGER

Agrouping
of the entitvs accounts is referred to as a ledger. Although some firms may
Use
variousledgersto accumulate certain detailed information, all firms have a general
ledger.
A generalledger is the "reference book" of the accounting system and is
used to
dassify
andsummarizetransactions, and to prepare data for basic financial
statements.
The
accountsin the general ledger are classified into two general groups:
1. balancesheet
or permanent accounts (assets, liabilities and owner's equity).
incomestatementor temporary accounts (income and expenses). Temporary
or nominalaccounts
are used to gather information for a particular accounting
[Link] the end
of the period, the balances of these accounts are transferred
to a permanent
owner's equity account.

has its own record in the ledger, Every account in the ledger maintains
thebas%unt
ormatof the
T-account but offers more information (e.g. the account number
upperright corner
ger and the journal reference column). Compared to a journal, a
organizesinformation
by account.