ACT 110

MODULE 3 – ACCOUNTING FOR SERVICE BUSINESS – THE ACCOUNTING CYCLE

ACCOUNTING CYCLE

The accounting cycle refers to a series of sequential steps or procedures performed to

accomplish the accounting process. The steps in the accounting cycle and their aims are as
follows:

Step 1 Identification of events to be Recorded

Aim: To gather information about transactions or events generally through the
source documents.

Step 2 Transactions are Recorded in the Journal

Aim: To record the economic impact of transactions on the firm in a journal,
a form that facilitates transfer to the accounts

Step 3 Journal Entries are posted to the Ledger

Aim: To transfer the information from the journal to the ledger for
classification.

Step 4 Preparation of a Trial Balance

Aim: To provide a listing to verify the equality of debits and credits in the
ledger.

Step 5 Preparation of the Worksheet including Adjusting Entries

Aim: To aid in the preparation of financial statements

Step 6 Preparation of the Financial Statements

Aim: To provide useful information to decision makers.

Step 7 Adjusting Journal Entries are Journalized and Posted

Aim: To record the accruals, expiration of deferrals, estimations and other
events from the worksheet.

Step 8 Closing Journal Entries are Journalized and Posted

Aim: To close temporary accounts and transfer profit(loss) to owner’s
equity.

Step 9 Preparation of a Post-closing Trial Balance

Aim: To check the equality of debits and credits of remaining open accounts.

Step 10 Reversing Journal Entries are Journalized and Posted

Aim: To simplify the recording of certain regular transactions in the next
 accounting period.

1. Transaction analysis- is the first step of the accounting cycle. The basic steps in
analyzing transactions are:

1. Identify the transaction from source documents

2. Indicate the accounts- either assets, liabilities, equity, income or expenses-affected by
the transaction.
3. Ascertain whether each account is increased or decreased by the transaction.
4. Using the rules of debit and credit, determine whether to debit or credit the account to
record its increase or decrease.

Source Documents are accomplished business documents, forms, and/or official papers that serve as
evidences supporting the underlying economic activity (business transactions).
Examples of source documents are:
1. Official receipt – a written acknowledgement of something received either in cash or non-cash
but is expressed in terms of monetary value.

2. Check – is a bill of exchange drawn on a bank and payable on demand, signed by the maker or
drawer, containing an unconditional order to pay a sum certain in money to the order of the payee.

3. Check voucher – is a document which serve as an evidence of check disbursement.

4. Promissory note – is a promise in writing to pay a specified sum of money at a specified date or
on demand to a certain party or to his order or bearer.

5. Bank deposit slip – is a document which serve as an evidence that money was deposited to a bank
for safety or convenience, to be withdrawn at the will of the depositor or under the rules and
regulations of the bank.

6. Cash voucher – is a document which serves as an evidence of disbursements from cash on hand.

7. Invoice – is a written itemized statement of items sold to the buyer together with the prices and
charges on the items.

8. Debit memorandum – is a written notice informing the client or customer of reduction in his
account.

9. Credit memorandum – is a written notice informing the client or customer of an increase in his
account.

10. Payroll – is a written list of gross salaries, its deductions, and the net amount paid to employees.

2. Transaction are journalized- is the second step of the accounting cycle.

 Recording involves the writing down of business transaction in a systematic manner and
in order of their occurrence in the Journal. A journal is a chronological record of entity’s
transaction. It is also called the book of original entry. Journalizing is the process of recording
transaction. The simplest journal is the General Journal. Other kind of journal is the Special
Journal.

A general journal has the following standard contents: date column, particulars,
posting reference (P.R.), debit column and credit column. Shown below is the formation of a
simple journal entry:
Page no.
Year Particulars PR Debit Credit
Month Day Debit item 1,750.35
Credit item 1,750.35
Explanation of the
Nature of transaction

In journalizing, the rules of double-entry system are observed in each transaction. The
value received is debited while the value parted is credited. The sum of the debits for every
transaction equals the sum of the credits; and the equality of the accounting equation is always
maintained.

Opening Entry is the first entry made in the general journal such as the recording of the
initial investment of the owner who for the first time engage into business.

Other set of books used by the business is a ledger, which has two kind: the General
Ledger and the Subsidiary ledger. A General ledger is the “reference book” of accounting system
and is used to classify and summarize transactions. A ledger is a “group of accounts” called
the book of final entry. It is in this book where transaction that were recorded in the journal are
transferred for final recording.

The accounts in the general ledger are classified into two general groups:

1. Balance Sheet or permanent accounts (assets, liabilities and owner’s equity)

sometimes called real accounts.

2. Income Statement or temporary account (income and expenses, sometimes

called nominal accounts.

Each account has its own record in the ledger. Every account in the ledger maintains the
basic format of the T-account. The left- hand side is called a debit while the right side is called
credit. Each side has the column for the: date, Particulars, Folio or Journal Reference and the
money column. A ledger organizes information by account. Shown below is the format of a
T – account in a general ledger:
 ACCOUNT TITLE Page No.
Date Items F Debit Date Items F Credit
Month Day Month Day

Chart of Accounts is a list of all the accounts and their account numbers in the ledger. It
shows account titles which are arranged in the financial statement order, that is, Asset, Liabilities,
Owner’s Equity, Income and Expenses. Presented below is the chart of accounts of Royal Blue
Services:

Royal Blue Services

Chart of Accounts
ASSETS INCOME
Page Account Page Account
No. No. No. No.

1 111 Cash 19 441 Service Income

2 112 Accounts Receivable
3 113 Supplies EXPENSES
4 114 Prepaid Rent 20 551 Salaries Expense
5 115 Prepaid Insurance 21 552 Supplies Expense
6 116 Service Vehicle 22 553 Rent Expense
7 117 Accumulated Depreciation 23 554 Insurance Expense
8 118 Office Equipment 24 555 Utilities Expense
9 119 Accumulated Depreciation 25 556 Depreciation Expense-
Service Vehicle
LIABILITIES 26 557 Depreciation Expense-
10 221 Notes Payable 27 558 Miscellaneous Expense
11 222 Accounts Payable 28 559 Interest Expense
12 223 Salaries Payable
13 224 Utilities Payable
14 225 Interest Payable
15 226 Unearned Service Fee

OWNER’S EQUITY
16 331 Royal, Capital
17 332 Royal, Drawing
18 333 Revenue and Expense Summary

3. Posting -is the third step of the accounting cycle.

 Posting is the process of transferring entries from the journal to the ledger. The transfer of
entries from the journal to the ledger is actually the sorting process or “classifying aspect of
accounting” as each value is placed according to its kind, class or nature.

In posting, debits in the journal are posted as debits in the ledger, and credits in the
journal as credits in the ledger. The following are the steps in posting:

1. Transfer the date of the transaction from the journal to the ledger.
2. Transfer the page number from the journal to the journal references (J.R.) column of
the ledger.
3. Post the debit figure from the journal as a debit figure in the ledger and the credit
figure from the journal as a credit figure in the ledger.
4. Enter the account number in the posting reference column of the journal once the
figure has been posted to the ledger.

Footing is the process of adding each of the two amount columns of an account or item
in the general ledger and finding their balances thereof. If the account is a credit balance,
meaning credit total is greater than debit total, the difference is placed in the credit column. If
the account is debit balance, meaning debit total is greater than the credit total, the difference is
placed in the debit column.

After footing, those accounts with a “debit” or “credit” balances are said to be accounts
with “open balances” or referred to as “open accounts”.

4. Trial Balance Preparation - is the fourth step of the accounting cycle

After footing, accounts in the ledger with open balances are listed down with their
respective balances, in a summary report called Trial Balance. This is done to check the
mathematical accuracy in posting and footing and to verify the equality of debits and credit in the
ledger at the end of each accounting period. But the equality of debit and credit does not signify
the absence of any error at all.

The following is the procedures in the preparation of a trial Balance:

1. List the account titles in the General Ledger with “open balances” following the
sequences of filing the accounts in the ledger.
2. Obtain the account balance of each account from the ledger and enter the debit
balances in the debit column and the credit balances in the credit column.
3. Add the debit and credit columns.
4. Compare the totals and “double rule” if total debits equal total credits.

A trial balance is of two forms: “Trial Balance of Balances” and “Trial Balance of
Totals”. Shown below is the trial balance of Royal Blue Services.
 Royal Blue Services
Trial Balance
May 31, 2004

DEBIT CREDIT
Cash P 44,400
Accounts Receivable 24,000
Supplies 36,000
Prepaid Rent 16,000
Prepaid Insurance 28,800
Service Vehicle 840,000
Office Equipment 120,000
Notes Payable P 420,000
Accounts Payable 106,000
Utilities Payable 2,800
Unearned Service Revenue 20,000
Royal, Capital 500,000
Royal, Drawings 28,000
Service Income 124,800
Salaries Expense 27,600
Utilities Expense 8,800 _________
Total P 1,173,600 P 1,173,600
======== =======

Errors in the Trial Balance

The trial balance is said to be a control device that help detect and minimize accounting
errors. The inequality of the totals of the debit and credit indicates that an error and/or omission
have been committed. There are cases too where errors and omissions are committed yet the
trial balance total are equal.

The following cases would result to the inequality of trial balance:

1. Errors in preparing the trial balance

1. Incorrect addition of the debit and/or credit column
2. Incorrect recording of the account amount on the trial balance
* transposition
* slide
3. A debit balance was recorded on the trial balance as credit; or a
credit balance was recorded on the trial balance as debit.
4. Omission of the entire amount on the trial balance

2.Errors in determining the account balances:

1. Incorrect computation of balance (addition and/or subtraction process)
2. A balance was entered in the wrong balance column
 3.Error in posting a transaction to the ledger
1. Omission of a debit or credit posting
2. A debit entry was posted as a credit or vice versa.
3. Incorrect amount was posted to the account.

The following are errors and omissions committed that will still result to equality of the
totals of debit and credit of trial balance:

1. Failure to record transaction in the journal

2. Both debit and credit of journal entry may not have been posted in
the ledger.
3. Recording the same transaction more than once.
4. Recording an entry but with the same erroneous debit and credit
amounts
5. Correct journal entry amount may have been posted to a wrong
account.
6. Inappropriate use of account title in the journal that was carried to
posting in the ledger.

The following is the suggested approach to locate an error in the trial balance:

1. Check the addition of the debit and credit column of the trial balance;
2. Check whether the corresponding amount of each of the listed account in the trial
balance are posted in their proper normal balance column. If still out of balance then,
3. Determine the difference between the debit and credit totals
a. If the amount of difference is 1, 10, 100 or 1,000, it might be an error in
addition;
b. If the amount of difference is 9 or a multiple of 9, a transposition error was
committed, meaning the orders of figures written are reversed. For example,
36 was written as 63;
c. If the amount of difference is divisible by 2 it might be an error in listing the
account balance. A debit amount was listed in the credit column of the trial
balance and vice versa;
d. If the amount if difference is divisible by 9 (can be divided by 9) it indicates a
slide or misplacement of decimal point. For example, P 2,500 was incorrectly
written as P 250

(Note: step a to d could not be applied if there are two or more errors being
committed simultaneously.)

4. Compare the accounts and amounts in the trial balance with that in the ledger. Be
sure no account is omitted and amounts are correctly carried to its appropriate
column.
5. Recompute the balance of each ledger account.
6. Trace all postings from the journal to the ledger accounts.
Illustrative Problem:

The following are the transactions of Tina Locsin for the month of April, 2019:

April 1 – Tina Locsin established Locsin Decorators and invested P640,000.

2 – Purchased office equipment worth P45,500 on account.

5 – Bought office supplies for cash, P15,750.

8- Purchased a small truck for P840,000 paying P280,000 and issued a note payable for the
Balance.

10 – Purchased office supplies on account, P10,000.

15 – Completed a job and received P35,000 cash.

20 – Paid insurance premiums, P12,000.

22 – Paid P45,500 due on the purchase of equipment.

26 – Completed a job and billed the client, P70,000.

28 – Paid rent for the month, P10,000.

30 – Paid salary of worker, P20,000.

30 – Owner withdrew P15,000 cash.

Required: 1. Record the above transactions in the journal using the following accounts:

101 Cash 401 Service Income

102 Accounts Receivable
103 Office Supplies 501 Salaries Expense
121 Office Equipment 502 Rent Expense
122 Delivery Equipment 503 Insurance Expense
504 Miscellaneous Expense
201 Accounts Payable
202 Notes Payable

301 Locsin, Capital

302 Locsin, Withdrawal

2.Post to the ledger accounts (Use T-accounts)

3.Prepare a trial balance on April 30,2019.
ANSWERS:
GENERAL JOURNAL

DATE PARTICULARS F DEBIT CREDIT

April 1 Cash 101 P640,000

Locsin, Capital 301 P640,000

Initial investment

2 Office Equipment 121 45,500

Accounts Payable 201 45,500
Office equipment bought on
account.

5 Office Supplies 103 15,750

Cash 101 15,750
Supplies bought for cash.

8 Delivery Equipment 122 840,000

Cash 101 280,000
Notes Payable 202 560,000
Purchase of delivery
equipment and issuance of note.

10 Office Supplies 103 10,000

Accounts Payable 201 10,000
Purchase of office supplies on
account.

15 Cash 101 35,000

Service Income 401 35,000
Income received in cash.

20 Insurance Expense 503 12,000

Cash 101 12,000
Payment of insurance
premium.

22 Accounts Payable 201 45,500

Cash 101 45,500
 Paid accounts due.

26 Accounts Receivable 102 70,000

Service Income 401 70,000
Income earned on account.

28 Rent Expense 502 10,000

Cash 101 10,000
Paid rent for the month.

30 Salaries Expense 501 20,000

Cash 101 20,000
Paid salary of worker.

30 Locsin, Withdrawal 302 15,000

Cash 101 15,000
Owner's personal.

Requirement 2: Posting to the ledger (For simplicity, T-Accounts are used instead of the formal
accounts).
Cash 101 Accounts Receivable 102 Office Supplies 103
4/1 - P640,000 4/5 - P 15,750 4/26-P70,000 4/5 -P15,750
4/15- 35,000 4/8 - 280,000 Bal. P70,000 4/10- 10,000
4/20- 12,000 Bal. P25,750
4/22 - 45,500
4/28 - 10,000
4/30 - 20,000
4/30 - 15,000
P 675,000 P398,25
Bal. P 276,750

Office Equipment 121 Delivery Equipment 122 Accounts Payable 201

4/2 - P45,500 4/8 – P840,000 4/22-P45,500 4/2 - P45,500
Bal. P45,500 Bal. P840,000 4/10- 10,000
P45,500 P55,500
Bal. P10,000

Notes Payable 202 Locsin, Capital 301 Locsin, Withdrawal 302

4/8-P560,000 4/1-P640,000 4/30-P15,000
Bal. P560,000 Bal. P640,000 Bal.P15,000
 Service Income 401 Salaries Expense 501 Rent Expense 502
4/15-P35,000 4/30-P20,000 4/28-P10,000
4/26- 70,000 Bal. P20,000 Bal. P10,000
Bal. P105,000

Insurance Expense 503 Miscellaneous Expense 504

4/20- P12,000
Bal. P12,000

Requirement 3 – Preparation of trial balance

Locsin Decorators
Trial Balance
April 30, 2019

Account No. Account Titles Debit Credit

101 Cash P 276,750

102 Accounts Receivable 70,000
103 Office Supplies 25,750
121 Office Equipment 45,500
122 Delivery Equipment 840,000
201 Accounts Payable P 10,000
202 Notes Payable 560,000
301 Locsin, Capital 640,000
302 Locsin, Withdrawal 15,000
401 Service Income 105,000
501 Salaries Expense 20,000
502 Rent Expense 10,000
503 Insurance Expense 12,000 __________
Totals P1,315,000 P1,315,000
NAME:____________________________________ SCORE: ____________
COURSE/SECTION:_________________________ DATE: _____________

I. Check (/) the appropriate column to determine whether the statement is TRUE or FALSE.
TRUE FALSE
_____ ______1. The general journal is a form of ledger.
_____ ______2. Journalizing and posting process are bookkeeping in nature.
_____ ______3. Posting reference (PR) facilitates cross-referencing between the journal
and the ledger.
____ ______4. A complete record of information about a particular business transaction
is initially recorded in the ledger.
_____ ______5. The accounting record used in journalizing is called journal.
_____ ______6. Posting refers to the process of transferring data from the ledger to the
journal.
_____ ______7. Business transaction should be recorded chronologically.
_____ ______8. The journal is otherwise known as the book of original entry.
_____ ______9. The ledger is otherwise known as the book of final entry.
_____ ______10. The chart of accounts shows the account titles a particular company uses.
_____ ______11. The business transactions are initially recorded in the ledger
_____ ______12. The journal is said to be complete without an “explanation”
_____ ______13. An erroneous journal entry cannot be corrected anymore.
_____ ______14. Recording is the first phase in the accounting cycle.
_____ ______15. There is no indention for the accounts debited and credited in a journal
entry.

II. From the list possible answers, write the letter that corresponds to each of the given
statements.
LIST OF POSSIBLE ANSWERS
A- Chart of accounts F- Ledger
B- Journal G- Double-entry System
C- Opening Journal Entry H- Simple Journal Entry
D- Journalizing I- Books of Accounts
E- Recording J- Journal Entry

GIVEN STATEMENTS
____________1. The first phase of accounting.
____________2. Storage of accounting data.
____________3. An entry containing one debit and one credit item.
____________4. The book of original entry.
____________5. The act of recording transactions in the journal.
____________6. These are called groups of “account”
____________7. Recognizes the two-fold effects of a transactions.
____________8. An entry recording the initial investments of the owner.
____________9. An entry in the journal.
____________10. The book of final entry.

III. Multiple Choice. Encircle the best answer.

1. The business transaction is initially recorded in the

a. ledger b. journal c. chart of accounts d. T-account

2. A ledger is
a. is a collection of accounts c. is a list of alphabetical accounts
b. is a book of original entry d. contains equity accounts only.

3. Posting
a. occurs before journalizing c. transfers entries from the journal
b. transfers entries to the journal d. is not a recording process

4.An entry that consist of one debit and one credit is

a. compound entry c. books of final entry
b. simple entry d. complex entry

5. The basis upon which the journalizing is prepared is

a. journal c. business documents
b. account number d. posting reference

6. The process of transferring accounting data from the books of original entry to the book of
final entry is
a. journalizing c. posting
b. cross reference d. none of these

7. The accounts in the chart of accounts are arranged I

a. alphabetical order c. chronological order
b. numeric order d. the order they are created

8.Which of the following is not considered an account?

a. Equipment c. Revenues
b. Accounts Payable d. Cash

9.If an owner invested her computer and printer in the business, there would be an increase in
a. Cash c. Computer Equipment and Drawing
b. Cash and Drawing d. Computer Equipment and Capital

10.The purchase of an asset for cash will

a. increase total assets and decrease total liabilities
b. have no effect on total assets or total liabilities
c. increase total assets and increase total liabilities
d. increase total assets and increase total owner’s equity
11.A business received P6,000 cash from charge customers to apply on account. The effect of the
transaction is an increase in asset and a(an)
a. increase in revenue c. decrease in liability
b. decrease in capital d. decrease in another asset

12. The deposit of cash by the owner in the name of the business would involve
a. increasing an asset and increasing a liability
b. increasing an asset and increasing owner’s equity
c. decreasing an asset and increasing owner’s equity
d. increasing an asset and increasing revenue

13. An example of an expense is

a. investments c. prepaid insurance
b. supplies consumed d. supplies unused

14. A decrease in owner’s equity/proprietorship may result from a(an)

a. purchase of supplies for cash
b. revenue that is derived from sale of goods or services
c. investment of cash in the business by the owner
d. withdrawal of cash from the business by the owner

15. Which of the following sequences of documents or records describes the proper sequence in
the accounting cycle?
a. source documents, worksheet, journal, ledger, financial statements
b. source documents, ledger, journal, worksheet, financial statements
c. source documents, journal, ledger, worksheet, financial statements.
d. worksheet, source documents, financial statements, ledger, journal

16. Journalizing does not include

a. debiting account(s) that are affected
b. crediting accounts(s) that are affected
c. posting the debits and credits to the accounts
d. entering the date

17. A business buys office equipment for cash. What effect will this transaction have on the
accounts?
a. Debit an asset account and credit an expense account
b. Debit an asset account and credit an asset account
c. Debit an expense account and credit an asset account
d. Debit a liability account and credit an asset account

18. A cash payment on a loan affects which of the following accounts?

a. Cash and Accounts Receivable c. Cash and Notes Payable
b. Cash and an expense account d. Cash and a revenue account
19. To find an error, you should do all of the following except
a. double-check every entry
b. find the difference between debits and credits
c. erase questionable entries
d. retrace any math computations

20.When posting from the journal to the ledger, the accountant failed to post a P500 debit to
Cash. The effect of this error will be that the
a. The amounts in the journal will be in error.
b. The trial balance will not balance.
c. The .total debits in the trial balance will be larger than the total credits.
d. The cash account balance will be overstated.
NAME:____________________________________ SCORE: ____________
COURSE/SECTION:_________________________ DATE: _____________

Problem 1:
On March 1, 2019, Sevilla Capistrano, a recent medical board topnotcher, started his medical
practice. During the month, the following transactions were completed;
March 1 Capistrano invested P200,000 personal funds to start her medical practice.
2 Acquired medical equipment costing P95,000 from Tomas Medical Company, paying
P45,000 cash and issuing a promissory note for the balance.
3 Paid rent for the month, P7,000.
5 Acquired medical supplies from Suiza Medical Supply Company on account, P15,000.
7 Recorded cash received of P18,500 from patients for medical services rendered this
week.
9 Paid Micron Laboratory for performing laboratory works, P1,500.
12 Paid salary of medical technician and receptionist, P15,000.
15 Billed patients for services rendered, P18,000.
15 Recorded cash received of P14,5000 from patients for medical services rendered for
this week.
18 Paid Suiza Medical Supply Company, P5,000 to apply on account.
20 Paid electric and water bills, P1,900.
22 Collected P14,700 from patients billed on March 15.
25 Paid miscellaneous expenses, P3,000.
26 Paid salaries of attendants, P9,000.
28 Withdrew P40,000 from the medical practice.
31 Recorded cash receipts of P46,000 for medical services rendered for the last half of
the month.

Required:
1. Prepare the journal entries for the March transactions using the account titles given.
2. Post the entries to the ledger accounts, using account numbers for cross-reference
and using journal page number 1 and 2. The following accounts will be needed: Cash (110);
Accounts Receivable (120); Medical Supplies (130); Medical Equipment (140); Notes Payable
(210); Accounts Payable (220); Capistrano, Capital (310); Capistrano, Drawing (320); Medical
Revenues,(410); Salaries Expense (510); Rent Expense (520); Laboratory Expense (530);
Utilities Expense (540); and Miscellaneous Expense (550).
3. Prepare a trial balance as of March 31, 2019.
NAME:____________________________________ SCORE: ____________
COURSE/SECTION:_________________________ DATE: _____________

Problem 2:
L. Victoria, a veteran photographer, opened a studio for his professional practice on July 1, 2019.
Transactions completed during the month follows:

July 1 - Invested P300,000 to start his business.

2 - Bought photographic equipment from Canon Equipment, P60,000. Paid partial payment
of P40,000 and issued a promissory note for the balance.

3 - Rented a space for his studio. Paid advance rental of P60,000 for six months.

5 - Bought furniture and fixtures on account, P15,000.

7 - Bought photographic supplies for cash, P5,000.

8 - Invested personal photography equipment worth P40,000.

10 - Made partial payment of account, P10,000.

12- Paid premium for insurance coverage for his business, P35,000.

15 - Received cash of P33,000 for services rendered for the first half of the month.

18 – L. Victoria withdrew cash for personal use, P6,500.

19 - Billed clients for services rendered on account, P28,900.

20 - Paid minor repairs on photographic equipment, P1,500.

21 - Collected from customers billed on July 19, P10,000.

29 - Paid salary of workers, P12,000.

31 - Paid cost of light and water for the month, P3,000.

Required: 1. Record the above transactions in a two-column journal. Use the following account
titles: Cash; Accounts Receivable; Supplies; Prepaid Rent; Prepaid Insurance; Furniture and
Fixtures; Photographic Equipment; Accounts Payable; Notes Payable; Victoria, Capital;
Victoria, Withdrawal; Service Revenues; Salaries Expense; Repairs Expense; Utilities Expense
and Miscellaneous Expense.
2. Post to the ledger accounts. Disregard the PR and JR column
3. Prepare a Trial Balance.
Required:
1. Reconstruct the journal entries that gave rise to these postings in the
T-accounts. (Use Journals)
2. Foot the above T-accounts
3. Prepare a Trial Balance
NAME:____________________________________ SCORE: ____________
COURSE/SECTION:_________________________ DATE: _____________

Problem 3:

Below is the Dugong Repair Services trial balance, which does not balance:

Dugong Repair Services

Trial Balance
December 31, 2019

Cash P 110,400
Accounts Receivable 284,600
Supplies 66,400
Prepaid Insurance 40,000
Office Equipment 526,800
Notes Payable P 130,000
Accounts Payable 195,400
Dugong, Capital 297,200
Dugong, Withdrawals 100,000
Repair Revenues 821,400
Salaries Expense 348,700
Advertising Expense 12,200 .
Totals P 1,389,100 P 1,389,100

The following information is obtained from a review of the record keeping process:

a. An account receivable for P 19,600 was incorrectly added as P 16,900 when

computing the balance of the Accounts Receivable account.
b. A debit posting from the journal for P5,200 is missing from the Advertising
Expense account.
c. A credit posting of P 15,000 to Notes Payable should have been made to
Accounts Payable.
d. A debit posting of P 34,000 to Supplies was incorrectly posted as P 3,400.
e. Credit to the ledger Accounts Payable account were under footed by P60,000.
f. Dugong’s revenues are overstated in the ledger account by P 40,000.
g. A credit posting for Repair Revenues from the journal in the amount of P 63,600
is missing.
h. Supplies acquired in the amount of P 17,400 have been incorrectly posted to the
Office Equipment account.

Required: Prepare a corrected trial balance.

NAME:____________________________________ SCORE: ____________
COURSE/SECTION:_________________________ DATE: _____________

Problem 4:

Mel Roxas owns the Ginebra Team, a professional basketball team in the National
Basketball Association. Presented below is the November 30, 2019 trial balance representing
activities from Jan1, 2019 to November 30, 2019, together with the account numbers and
titles.

Ginebra Team
Trial Balance
November 30, 2019

Acct No. Account Titles Debit Credit

110 Cash P 1,129,800
120 Accounts Receivable 3,712,500
130 Uniform Supplies 31,050
140 Prepaid Insurance 0
150 Land 2,025,000
160 Training Facilities 12,750,000
170 Training Equipment 2,625,000
180 Player Contracts 11,250,000
210 Notes Payable P 1,800,000
220 Accounts Payable 4,725,000
230 Mortgage Payable 10,500,000
310 Roxas, Capital 17,643,750
320 Roxas, Drawing 1,875,000
410 Game Attendance Revenue 10,125,000
510 Salaries Expense 4,875,000
520 Advertising Expense 400,950
530 Travel Expense 1,532,400
540 Laundry Expense 528,000
550 Medical Expense 194,550
560 Utilities Expense 1,734,000
570 Miscellaneous Expense 130,500
Totals P 44,793,750 P 44,793,750
======== ========

During the month of December 2019, the Araneta Center were participating in the
2019 playoffs and the following transactions took place:

Dec. 1 Acquired the contract of Alvin Patrimonio from Alaska for P1,875,000;
paying P 225,000 in cash and financing the P 1,650,000 by issuing a note
payable.
2 Collected P 2,809,500 on accounts receivable from season-ticket holders.
 3 Settled accounts payable, P1,657,500.
4 Paid TV advertising, P78,600
5 Acquired on account additional uniforms for the upcoming series with
the Alaska Team, P 30,750
9 Billed season-ticket holders for the last five games, P320,250.
10 Paid the amount due on this date for a note payable, P600,000.
11 Acquired insurance for the months of December to June P 215,250,
recorded as prepaid insurance.
12 Acquired additional training equipment on account, P 319,500.
15 Paid players’ salaries P 1,136,250.
17 Received P3,316,050 cash for tickets to playoff games.
19 Paid travel expenses, P558,000.
20 Paid laundry expense, P12,600.
23 Paid creditors, P941,850
25 Paid miscellaneous expense, P 26,850.
26 Paid medical expense, P18,900.
27 Paid utilities expense, P 210,450.
28 Paid players’ salaries P 1,240,650.
30 Roxas withdrew, P 250,000.

Required: 1. Enter the amounts from the November 2004 trial balance into the
appropriate ledger accounts.
2. Prepare the journal entries for the December transactions.
3. Post the entries to the ledger using page 12 as the journal
page reference.
4. Prepare a trial balance as at Dec 31, 2019.