5.

Teaching and Learning Activities

Activity 1 Indicate debit and credit effects and normal balance.

For each of the following accounts indicate the effects of (a) a debit and (b) a credit on the accounts and
(c) the normal balance of the account.
a. Accounts Payable.
b. Advertising Expense.
c. Service Revenue.
d. Accounts Receivable.
e. A. J. Ramos, Capital.
f. A. J. Ramos, Drawing.

Activity 2 Identify accounts to be debited and credited.

Transactions for the Hans Nantes Company for the month of June are presented below. Identify the
accounts to be debited and credited for each transaction.

June 1 Hans Nantes invests P5,000 cash in a small welding business of which he is the sole proprietor.
2 Purchases equipment on account for P900.
3 P800 cash is paid to landlord for June rent.
12 Bills J. Kaluya P300 for welding work done on account.

Activity 3 Post journal entries to T accounts.

Selected transactions for the Fuentes Company are presented in journal form below. Post the
transactions to T accounts. Make one T account for each item and determine each account’s ending
balance.

Activity 4 Prepare a trial balance.

From the ledger balances given below, prepare a trial balance for the Campos Company at June 30,
2010. List the accounts in the order shown on page 61 of the text. All account balances are normal.

Accounts Payable P9,000, Cash P8,800, Campos, Capital P20,000; Campos, Drawing P1,200;
Equipment P17,000, Service Revenue P8,000, Accounts Receivable P3,000, Salaries Expense P6,000,
and Rent Expense P1,000.

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 Activity 5 Prepare a correct trial balance.
An inexperienced bookkeeper prepared the following trial balance. Prepare a correct trial balance,
assuming all account balances are normal.

LIU KANG COMPANY

Trial Balance
December 31, 2020

Debit Credit
Cash P14,800
Prepaid Insurance P3,500
Accounts Payable 3,000
Unearned Revenue 2,200
L. Kang, Capital 13,000
L. Kang, Drawing 4,500
Service Revenue 25,600
Salaries Expense 18,600
Rent Expense ______ 2,400
P35,600 P52,000

6. Self-Assessment

Problem 1. Bob Sample opened the Campus Laundromat on September 1, 2020. During the first month
of operations, the following transactions occurred.

September 1 Bob invested P20,000 cash in the business.

2 The company paid P1,000 cash for store rent for September.
3 Purchased washers and dryers for P25,000, paying P10,000 in cash and signing a
P15,000, 6-month, 12% note payable.
4 Paid P1,200 for a one-year accident insurance policy.
10 Received a bill from the Daily News for advertising the opening of the laundromat P200.
20 Bob withdrew P700 cash for personal use.
30 The company determined that cash receipts for laundry services for the month were
P6,200.

The chart of accounts for the company is the same as that for Pioneer Advertising Agency plus No. 610
Advertising Expense.

Instructions
a. Journalize the September transactions. (Use J1 for the journal page number.)
b. Open ledger accounts and post the September transactions.
c. Prepare a trial balance at September 30, 2020.

Problem 2. Ron Benes decides to open a cleaning and laundry service near the local college campus
that will operate as a sole proprietorship. During the first month (January, 2020) of operations, the
following transactions occurred:

1. Ron Benes invests P20,000 in cash to start a cleaning and laundry business on June 1.
2. Purchased laundry equipment for P5,000 paying P3,000 in cash and the remainder due in 30 days.
3. Purchased laundry supplies for P1,200 cash.
4. Received a bill from Campus News for P300 for advertising in the campus newspaper.
5. Cash receipts from customers for cleaning and laundry amounted to P1,500.
6. Paid salaries of P200 to student workers.
7. Billed the Tiger Football Team P200 for cleaning and laundry services.
8. Paid P300 to Campus News for advertising that was previously billed in Transaction 4.
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9. Ron Benes withdrew P900 from the business for living expenses.
10. Incurred utility expenses for month on account, P400.

Instructions
a. Journalize the September transactions using the following accounts: Cash, Accounts Receivable,
Laundry Supplies, Laundry Equipment, Accounts Payable, R. Benes, Capital, R. Benes, Drawing,
Laundry Revenue, Advertising Expense, Salaries Expense, and Utilities Expense.
b. Open ledger accounts and post the January transactions.
c. Prepare a trial balance at January 31, 2020.

Problem 3. Eun Woo Landscapers is in the business of maintaining condominium grounds. The following
are some of the account titles used by the company:
1. Cash 7. Accounts Payable
2. Accounts Receivable 8. Woo, Capital
3. Supplies 9. Woo, Withdrawals
4. Prepaid Insurance 10. Landscaping Revenues
5. Equipment 11. Rent Expense
6. Notes Payable 12. Repairs Expense

Woo Landscapers completed the following transactions:

Debit Credit
a. Paid for supplies purchased on account last month. _____ _____
b. Billed a client for landscaping services. _____ _____
c. Made rent payment for the current month. _____ _____
d. Purchased supplies on credit. _____ _____
e. Received cash from customers billed last month. _____ _____
f. Ordered equipment. _____ _____
g. Received a bill for repairs. _____ _____
h. Received and paid for the equipment ordered in (f). _____ _____
i. Made a payment on accounts payable. _____ _____
j. Paid the bill received in (g). _____ _____
k. Received cash from customers for landscaping services. _____ _____
l. Paid employees’ salaries. _____ _____
m. Paid for repairs with cash. _____ _____
n. Acquired equipment on account. _____ _____
o. Booked an appointment for services. _____ _____
p. Made cash withdrawals. _____ _____

Required:
Analyze each transaction and show the accounts affected by entering the corresponding numbers in the
appropriate debit or credit columns. Indicate no entry, if appropriate.

Problem 4. Developing a Chart of Accounts

Min Ho organized a new business and named it Ho Business Consultancy. Listed below are the
accounts that will be needed in the ledger:

Consulting Revenues Ho. Withdrawals

Accounts Receivable Income Summary
Building Office Supplies Expense
Cash Ho, Capital
Rent Expense Notes Payable
Furniture and Fixtures Prepaid Rent
Land Interest Expense
Miscellaneous Expense Salaries Expense
Referral Revenues Unearned Consulting Revenues
Accumulated Depreciation-Building Office Supplies
Accumulated Depreciation-F/F Interest Payable
Depreciation Expense-Building Insurance Expense
Depreciation Expense-F/F Accounts Payable
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Required:
Arrange these accounts in the order in which they would appear in the ledger. Assign each account a
number, using a three-digit numbering scheme: the 100 series for assets, the 200 series for liabilities,
etc. Use the second digit to indicate specific accounts within a major category; for example, Cash would
be account number 110.

Problem 5. Classification of Accounts

The following ledger accounts are used by Joong Ki Repair Shop:
a. Cash m. Ki, Withdrawals
b. Salaries Expense n. Salaries Payable
c. Accounts Receivable o. Unearned Revenues
d. Ki, Capital p. Office Equipment
e. Service Revenues q. Rent Payable
f. Prepaid Rent r. Notes Receivable
g. Accounts Payable s. Interest Expense
h. Land t. Notes Payable
i. Supplies Expense u. Supplies
j. Prepaid Insurance v. Interest Receivable
k. Utilities Expense w. Rent Expense
l. Service Revenues

Required:
Indicate each account’s classification and normal balance by placing (/) marks.

Type of Account
Normal Balance
Owner's Equity
Asset Liability Ki, Ki,
Capital Withdrawals Revenues Expenses Debit Credit
a. / /
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.
p.
q.
r.
s.
t.
u.
v.
w.

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Problem 6. Developing a chart of accounts and recording transaction in T- Accounts.
Hyun Bin organized Eternal Images, a photography and portrait studio, on Oct. 1, 2019. The studio
completed the following transactions during the month.

Oct 1 Deposited P350,000 in a bank account in the name of the business.

3 Paid two month’s rent deposit and one-month advance, P40,500.
5 Transferred to the business personal photography equipment valued at P129,000.
7 Ordered additional photography equipment, P75,000.
8 Purchased office equipment for cash, P54,000.
10 Received and paid for the photography equipment ordered on Oct. 7, P75,000.
12 Purchased photography supplies on credit, P21,000.
13 Received cash for previously unbilled portraits, P11,400.
17 Billed customers for portraits, 22,500.
19 Paid fifty percent of the supplies purchased on Oct. 12, P10,500.
25 Paid the electricity bill for Oct., P3,600
26 Paid the telephone bill for Oct., P2,100
28 Received payments from the customers billed on Oct.17, P7,500
29 Paid salaries to personnel, 12,000
30 Received an advance payment from a customer, P1,500
31 Withdrew P16,000 from the business for a personal emergency.

Required:
1. Read the transactions and develop a chart of accounts applicable to business.
2. Record the transactions daily into T-accounts.
3. Determine the balance of each account.

Problem 7. Recording Transactions in T-accounts and Preparing a Trial Balance

On May 1, 2019, Jong Suk opened Self-Service Laundry. During May, the following transactions were
completed:
a. Suk deposited P250,000 in a bank account in the name of the business.
b. Bought chairs and a table paying cash, P6,700.
c. Bought laundry supplies on account from Salvador Company, P3,250.
d. Paid rent for the month, P5,750.
e. Bought washing machine and dryers from Iloilo Equipment Company, P115,000 paying P35,000 in
cash and the balance on account.
f. Revenues earned on cash basis for the first half of the month, P12,350.
g. Bought insurance for one year, P5,600.
h. Paid accounts to Iloilo Equipment Company, P7,400
i. Received and paid electric bill, P2,080.
j. Revenues earned on cash basis for the second half of the month, P12,350
k. Paid salaries of the part-time assistant, P7,400
l. Suk withdrew cash for personal use, P5,000
m. Paid accounts to Salvador Company, P2,750.
n. Paid the city government for sidewalk repair assessment, P2,800.

Required
1. Establish the following T-accounts: Cash, Accounts Receivable; Prepaid Insurance; Equipment;
Furniture and Fixtures; Accounts Payable; Suk, Capital; Suk, Withdrawals; Laundry Revenues;
Salaries Expense; Supplies Expense; Rent Expense; Utilities Expense and Miscellaneous Expense.
2. Record the transactions directly into the T-accounts using the alphabets to identify each transaction.
3. Prepare a trial balance.

Problem 8. Recording Transactions in T-accounts and Preparing a Trial Balance

Seo Joon opened Cagayan Chiropractic Clinic. The following transactions occurred during the June of
this year.
a. Joon invested P180,000 cash in the professional practice.
b. Joon invested in the firm professional equipment with a fair market value of P72,000.
c. Bought a filing cabinet on account from Andrews Office Essentials. P3,260.
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d. Paid cash for chairs for the waiting room, P4,620.
e. Bought a multi-function printer for P15,400 from Main Office Machines, paying P7,400 down; the
balance is due in thirty days.
f. Received and paid telephone bill, P990
g. Billed patients for professional services performed, P16,120.
h. Paid P1,800 as membership dues to the national chiropractic Association.
i. Received and paid electric bill, P910
j. Received P6,900 from patients previously billed in transaction (g)
k. Paid in full accounts related to purchase of a filing cabinet.
l. Paid office rent for the month, P5,000
m. Received P2,420 cash from walk-in patients.
n. Paid salaries of nurse assistant, P8,250
o. Joon withdrew cash for personal use, P11,500.

Required:
1. Establish the following T-accounts: Cash; Accounts Receivable; Office Equipment; Medical
Equipment; Accounts Payable; Joon, Capital; Joon, Withdrawals; Service Revenues; Salaries
Expense; Rent Expense; Utilities Expense and Miscellaneous Expense.
2. Record the transactions directly into the T-accounts using the alphabets to identify each transaction.
3. Prepare a Trial Balance.

Problem 9. Preparing a Trial Balance

The Accounts of Dong Wook Advertising Agency follow with their normal balances as at Dec. 31, 2019:

Accounts Balances
Go, Capital 254,700
Insurance Expense 9,600
Accounts Payable 26,400
Service Revenues 258,000
Land 87,000
Cash 21,000
Salaries Expense 75,000
Building 375,000
Equipment Rentals Expense 15,000
Go, Withdrawals 18,000
Utilities Expense 30,000
Accounts Receivable 28,500
Notes Payable 135,000
Supplies Expense 15,000

Required:
Prepare a Trial Balance

Problem 10
Bo Gum Review School entered into the following transactions during October 2019.

Oct 1 Gum made additional investments of P50,000 in the business.

2 Bought liability insurance for one year, P14,500
3 Received a bill for advertising from SouthMin News, P3,200
4 Paid rent for the month, P8,900
7 Received a bill for equipment repair from students, P2,880
10 Received and deposited tuition from students, P62,500
11 Received and paid the telephone bill, P2,300
15 Bought chairs from E. Awayan Furniture Company, P18,800 paying P8,800 in cash and
the balance on account.
18 Paid accounts to SouthMin News, P3,200
21 Gum withdrew P8,000 for personal use.
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 24 Received a bill for gas and oil from Mindanao Oil Company, P1,800
25 Received and deposited tuition from students, P61,400
27 Paid salaries for the office assistants, P12,000
28 Bought a photocopier on account from Dagiangas Office Machines, P7,500.
29 Received P7,000 tuition from student who had charged the tuition on account last
month.
30 Received and paid the water utilities bill, P3,600
31 Paid for flower arrangements for front office, P620
31 Gum invested personal computer, with a fair market value of P12,300, in the business.

Required:
Prepare the journal entries for the October transactions. Use the following accounts: Cash; Accounts
Receivable; Prepaid Insurance; Equipment; Furniture; Accounts Payable; Gum, Capital, Gum,
Withdrawals; School Fees; Salaries Expense; Rent Expense; Gas and Oil Expense; Repair Expense;
Supplies Expense; Utilities Expense; Telecommunications Expense and Miscellaneous Expense.

Problem 11. Effects of Errors on the Trial Balance

Which of the following errors would cause a trial balance to have unequal totals? Explain your answers
briefly. Be able to state amount of the error, if any.
a. A payment to a creditor was recorded as a debit to Accounts Payable for P12,900 and as a credit to
Cash for P10,200.
b. A payment of P15,000 to a creditor for an account payable was debited to Accounts Receivable and
credited to Cash.
c. A purchase of office supplies of P42,000 in cash was recorded as a debit to Office Supplies for P4,200
and as a credit to Cash for P4,200.
d. A purchase of equipment for P45,000 in cash was recorded as a debit to Supplies for P45,000 and
as a credit to Cash for P45,000.

Problem 12. Effects of Errors on the Trial Balance

The following errors occurred in posting transactions from the journal to the ledger.
1. A payment of P1,700 for advertising was posted as a P1,700 debit to advertising expense and a
P7,100 credit to cash.
2. The receipt of P3,000 from a client on account was posted as a P3,000 debit to cash and a P3,000
credit to sales.
3. The purchase of supplies on account for P1,400 was posted twice as a debit to supplies and once as
a credit to accounts payable.
4. The payment of P2,200 to a creditor on account was posted as a credit to accounts payable for P2,200
and a credit to cash for P2,200.

For each of these errors, determine the following:

a. Is the trial balance out of balance?
b. If out of balance, what is the difference between the column totals?
c. Which column total is larger?

7. References

Ballada, W. et al 2019. Basic Financial Accounting and Reporting. DomDane Publishers

Millan, Z. 2019. Intermediate Accounting. Bandolin Enterprises

Weygandt, J. et al 2019. Accounting Principles 13E. John Wiley & Sons, Inc.

ISUE__ __ Syl ___

Revision: 02
Effectivity: August 1, 2020
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