( Comparison between the Periodic System and Perpetual System in Recording Transactions)

Transactions Periodic Dr. Cr.

1 Purchase of merchandise Purchases XX
Cash/Accounts Payable XX
2 Payment of freight charges Freight-in XX
Cash/Accounts Payable XX
3 a) Returned defective merchandise Cash/Accounts Payable XX
bought on account Purchase Returns &
b) Allowances granted by seller on Allowances XX
account purchases
c) Issued debit memo to seller for
merchandise returns
4 Payment of account within Accounts Payable XX
discount period Purchase Discount XX
Cash XX
5 Sale of Merchandise on Account Accounts Receivable XX
Sales XX

6 a. Received defective merchandise Sales Returns & Allow. XX

bought on account Accounts Receivable XX
b. Allowances granted to buyer on
account sales
 c. Issued credit memo to buyer for
merchandise returns

7 Collection of account within Cash XX

discount period Sales Discount XX
Accounts Receivable XX

Difference in Recording Owner's Investment and Withdrawal of Merchandise Under the Periodic and Perpetua
Inventory. (If the owner's withdrawal is NOT merchandise, the journal entry is Debit Owner's Drawings and Cr
Transactions Periodic
1 Initial Investment Merchandise Inventory XX
Owner, Capital XX
2 Additional Investment Purchases XX
Owner, Capital XX
3 Temporary Withdrawal Owner, Drawing XX
(Owner is anticipating profit in the Purchases XX
business and has the intention of
returning the amount withdrawn)
4 Permanent Withdrawal Owner, Capital XX
(Owner has no intention of Purchases XX
returning the amount withdrawn)
Note: Under the periodic system, the Purchases account is credited for owner's withdrawal of merchandise for
order to keep the balance of the Merchandise Inventory account to its original amount.

The different terms in accounting for freight charges incurred in transporting the merchandise are as follows:

Terms of Freight Who should pay for the freight charges?

FOB shipping point, freight collect Buyer
FOB shipping point, freight prepaid Buyer
FOB destination, freight collect Seller
FOB destination, freight prepaid Seller
 Terms of Shipment (Periodic Method)

(Buyer's Books)
1 FOB Shipping Point, Freight Collect FOB Shipping Point, Freight Collect
Purchases 200,000 Accounts Receivable
Accounts Payable 200,000 Sales
Purchased merchandise on account. Sold merchndise on account.

Freight-In 3,000
Cash 3,000
Paid freight charges.

Analysis: The buyer, being the one responsible for the payment
of freight, actually paid for it. Freight cost is not reflected in
seller's books.
2 FOB Shipping Point, Freight Prepaid FOB Shipping Point, Freight Prepaid
Purchases 200,000 Accounts Receivable
Accounts Payable 200,000 Sales
Purchased merchandise on account. Sold merchndise on account.

Freight-In 3,000 Accounts Receivable

Accounts Payable 3,000 cash
 To record freight charges. Paid freight charges to be collected
from buyer.

Analysis: The buyer should be the one to pay for the freight charges Analysis: Seller records the freight ch
but seller paid the freight charges at the time of shipment. To reimburse receivable from the buyer because th
the seller, buyer records the freight charges paid by the seller as pay for the freight charges but the se
accounts payable to the seller. shipment.

Terms of Shipment (Periodic Method)

(Buyer's Books)
3 FOB Destination, Freight Collect FOB Destination, Freight Collect
Purchases 200,000 Accounts Receivable
Accounts Payable 200,000 Sales
Purchased merchandise on account. Sold merchndise on account.

Accounts Payable 3,000 Freight-out

 Cash 3,000 Accounts Receivable
Paid freight charges to be shouldered by seller. Freight charges on sale pf merchandi

Analysis: Seller should be the one to pay for the freight charges but Analysis: Since the seller should be th
the shipper collected the charges from the buyer. Buyer seeks charges but the shipper collected the
reimbursement by reducing the accounts payable to the seller. reimburse the amount of freight paid
accounts receivable from the buyer t
charges from the amount collectible

4 FOB Destination, Freight Prepaid FOB Destination, Freight Prepaid

Purchases 200,000 Accounts Receivable
Accounts Payable 200,000 Sales
Purchased merchandise on account. Sold merchndise on account.

Freight-out
cash
Paid freight charges.
Note: In FOB Destination, Freight Collect and FOB Destination, Freight
Prepaid, the account title Freight-in should not appear in the books
of the buyer. This is because the buyer is not shouldering the freight
charges in transporting the goods to his place of business.
 Terms of Shipment (Perpetual Method)

(Buyer's Books)
1 FOB Shipping Point, Freight Collect FOB Shipping Point, Freight Collect
Merchandise Inventory 200,000 Accounts Receivable
Accounts Payable 200,000 Sales
Purchased merchandise on account. Sold merchndise on account.

Merchandise Inventory 3,000

Cash 3,000
Paid freight charges.

2 FOB Shipping Point, Freight Prepaid FOB Shipping Point, Freight Prepaid
Merchandise Inventory 200,000 Accounts Receivable
Accounts Payable 200,000 Sales
Purchased merchandise on account. Sold merchndise on account.
 Merchandise Inventory 3,000 Accounts Receivable
Accounts Payable 3,000 cash
To record freight charges. Paid freight charges to be collected
from buyer.

Analysis: The buyer should be the one to pay for the freight charges Analysis: Seller records the freight ch
but seller paid the freight charges at the time of shipment. To reimburse receivable from the buyer because th
the seller, buyer records the freight charges paid by the seller as pay for the freight charges but the se
accounts payable to the seller. shipment.

Terms of Shipment (Perpetual Method)

(Buyer's Books)
3 FOB Destination, Freight Collect FOB Destination, Freight Collect
Merchandise Inventory 200,000 Accounts Receivable
Accounts Payable 200,000 Sales
Purchased merchandise on account. Sold merchndise on account.
 Accounts Payable 3,000 Freight-out
Cash 3,000 Accounts Receivable
Paid freight charges to be shouldered by seller. Freight charges on sale pf merchandi

Analysis: Seller should be the one to pay for the freight charges but Analysis: Since the seller should be th
the shipper collected the charges from the buyer. Buyer seeks charges but the shipper collected the
reimbursement by reducing the accounts payable to the seller. reimburse the amount of freight paid
accounts receivable from the buyer t
charges from the amount collectible

4 FOB Destination, Freight Prepaid FOB Destination, Freight Prepaid

Merchandise Inventory 200,000 Accounts Receivable
Accounts Payable 200,000 Sales
Purchased merchandise on account. Sold merchndise on account.

Freight-out
cash
Paid freight charges.
ystem in Recording Transactions)
Perpetual Dr. Cr.
Merchandise Inventory XX
Cash/Accounts Payable XX
Merchandise Inventory XX
Cash/Accounts Payable XX
Cash/Accounts Payable XX
Merchandise Inventory XX

Accounts Payable XX
Merchandise Inventory XX
Cash XX
Accounts Receivable XX
Sales XX

Cost of Sales XX
Merchandise Inventory XX
Sales Returns & Allowances XX
Accounts Receivable XX

Merchandise Inventory XX
 Cost of Sales XX

Note: For Nos. 5 and 6, the

amount in the first entry is the
sales price of the merchandise
sold while the amount in the
second entry is the cost of
goods sold.
Cash XX
Sales Discount XX
Accounts Receivable XX

Under the Periodic and Perpetual Systems of

s Debit Owner's Drawings and Credit Cash).
Perpetual
Merchandise Inventory XX
Owner, Capital XX
Merchandise Inventory XX
Owner, Capital XX
Owner, Drawing XX
Merchandise Inventory XX
 Owner, Capital XX
Merchandise Inventory XX

r's withdrawal of merchandise for personal use in

original amount.

the merchandise are as follows:

Who paid?
Buyer
Seller
Buyer
Seller
 (Seller's Books)
B Shipping Point, Freight Collect
ounts Receivable ###
ales ###
d merchndise on account.

B Shipping Point, Freight Prepaid

ounts Receivable ###
ales ###
d merchndise on account.

ounts Receivable 3,000

3,000
d freight charges to be collected
m buyer.

alysis: Seller records the freight charges paid as accounts

eivable from the buyer because the buyer should be the one to
for the freight charges but the seller paid for it at the time of
pment.

(Seller's Books)
B Destination, Freight Collect
ounts Receivable ###
ales ###
d merchndise on account.

ight-out 3,000
ccounts Receivable 3,000
ight charges on sale pf merchandise.

alysis: Since the seller should be the one to pay for the freight
rges but the shipper collected the charges from the buyer, seller
mburse the amount of freight paid by the buyer by crediting the
ounts receivable from the buyer to deduct the cost of freight
rges from the amount collectible from the buyer.

B Destination, Freight Prepaid

ounts Receivable ###
ales ###
d merchndise on account.

ight-out 3,000
3,000
d freight charges.
 (Seller's Books)
B Shipping Point, Freight Collect
ounts Receivable ###
ales ###
d merchndise on account.

B Shipping Point, Freight Prepaid

ounts Receivable ###
ales ###
d merchndise on account.
ounts Receivable 3,000
3,000
d freight charges to be collected
m buyer.

alysis: Seller records the freight charges paid as accounts

eivable from the buyer because the buyer should be the one to
for the freight charges but the seller paid for it at the time of
pment.

(Seller's Books)
B Destination, Freight Collect
ounts Receivable ###
ales ###
d merchndise on account.
ight-out 3,000
ccounts Receivable 3,000
ight charges on sale pf merchandise.

alysis: Since the seller should be the one to pay for the freight
rges but the shipper collected the charges from the buyer, seller
mburse the amount of freight paid by the buyer by crediting the
ounts receivable from the buyer to deduct the cost of freight
rges from the amount collectible from the buyer.

B Destination, Freight Prepaid

ounts Receivable ###
ales ###
d merchndise on account.

ight-out 3,000
3,000
d freight charges.
Problem:

Modem Corp. was incorporated on April 1, 2016 to operate a merchandising business.

Journalize the transactions using periodic and perpetual inventory method. The transactions
during April 2016 are as follows:

1 Ris Mendoza gave Ᵽ39,000 cash investment for his buisiness.

2 Paid Easton Furniture Ltd Ᵽ10,000 for equipment purchased.
2 Purchased Ᵽ15,900 merhandise on account from Blc Pens Ltd FOB Shipping point, for term
2/10; n/30. Delivery charges, Ᵽ300 was paid by the buyer.
3 Purchased office supplies for amounting Ᵽ700.
4 Sold 15,200 of merchandise on account to Spellman Chair Rental Inc. terms 2/10; n/30
(Cost of Sales Ᵽ12,200)
5 Paid freight for April 4 Sales, Ᵽ200.
6 Received a memo from Blic Pen Ltd to reduce accounts by Ᵽ300 for defective merchandise
included in April 2.
11 Paid Blic Pen Ltd.
13 Received the amount due from Spellman Chair Rental for April 4 Sales.
14 Purchased Ᵽ14,400 of merchandise.
15 Paid salaries of Ᵽ1,500.
16 Issued promissory note for Ᵽ200,000 cash received from bank borrowing.
17 Received refund of Ᵽ500 from purchased merchandise.
18 Purchased Ᵽ14,200 merchandise on account form from Shae Distributors Inc. for terms
2/10; n/30.
20 Paid Ᵽ700 freight from May 18 purchase.
23 Sold Ᵽ16,400 merchandise (Cost of sale Ᵽ10,500)
26 Purchased Ᵽ12,300 of merchandise.
27 Paid Shaw Distributors Inc of Ᵽ9,000 on April 18 purchases. No discount on partial payment.
28 Mr. Ris took Ᵽ2,008 for personal use.
29 Paid return to customer from May 23 Sales, Ᵽ900.
30 Sold Ᵽ13,700 merchandise on account to Eagle Products Corp., FOB Destination, term 2/10; n/30.
30 Paid advertising Ᵽ1,000; Utilities Ᵽ400; Rent Ᵽ3,500; Salaries Ᵽ1,500.

Required:
1 Prepare journal entries to record April transactions.
2 Post transactions.
3 Create Chart of Accounts up Until Post Closing Trial Balance.

Assume the Merchandise Inventory is counted at April 30 and assigned a total cost of Ᵽ25,000.
 (Solution: Periodic Method)
(Posting to ledger
Modem Corporation
s Chart of Accounts Account:
Date
101 Cash 402 Sales Returns and Allowances Apr. 1
102 Accounts Receivable 403 Sales Discount Apr. 13
103 Office Supplies 501 Freight-in Apr. 16
104 Merchandise Inventory 502 Freight-out Apr. 17
105 Office Equipment 503 Purchases Apr. 23
201 Accounts Payable 504 Purchase Returns and Allowances
202 Notes Payable 505 Purchase Discount
301 R. Mendoza, Capital 506 Salaries Expense
302 R. Mendoza, Drawings 507 Advertising Expense
303 Income Summary 508 Utilities Expense
401 Sales 509 Rent Expense

Journal Entries: (Using General Journal) Page 1

Date Accounts and Explanations F Debit Credit
2016
Apr 1 Cash L-101 39,000
R. Mendoza, Capital L-301 Ᵽ 39,000
Investment of the owner.

2 Office Equipment L-105 10,000

Cash L-101 10,000
Cash purchase of equipment.

Purchases L-503 15,900

Freight-in L-501 300
/30. Accounts Payable L-201 15,900 Account:
Cash L-101 300 Date
Purchased mdse-Blc Pens Ltd, terms:2/10 Apr. 30

Office Supplies L-103 700

Cash L-101 700
 Purchased office supplies.

Accounts Receivable L-102 15,200

Sales L-401 15,200
Sold mdse-Spellman Chair rentals,terms:

Freight-out L-502 200

Cash L-101 200
Paid freight. Account:
Date
Accounts Payable L-201 300 Apr. 2
Purchase Returns and Allowances L-504 300
Allowances for defective merchandise.

Page 2
Date Accounts and Explanations F Debit Credit
Apr 11 Accounts Payable L-201 15,600
Purchase Discount L-505 Ᵽ 312
Cash L-101 15,288
Full payment-Blc Pen Ltd.

1 Cash L-101 14,896

Sales Discount L-403 304 Account:
Accounts Receivable L-102 15,200 Date
Full settlement-Spellman Chair Rental Apr. 2
Apr. 14
1 Purchases L-503 14,400 Apr. 18
Cash L-101 14,400 Apr. 26
Cash purchased of merchandise

1 Salaries Expense L-506 1,500

Cash L-101 1,500
Paid salaries

1 Cash L-101 200,000

Notes Payable L-202 200,000
 Loan proceeds from bank. Account:
Date
1 Cash L-101 500 Apr. 2
Purchase Returns and Allowances L-504 500 Apr. 20
Cash refund from purchased merchandise

1 Purchases L-503 14,200

Accounts Payable L-201 14,200
Purchased mdse-Shae Dist. Inc, terms:2/10

2 Freight-in L-501 700

Cash L-101 700
Paid freight.

2 Cash L-101 16,400

Sales L-401 16,400 Account:
Cash sales Date
Apr. 6
2 Purchases L-503 12,300 Apr. 11
Cash L-101 12,300 Apr. 27
Cash purchases

2 Accounts Payable L-201 9,000

Cash L-101 9,000
Partial payment-Shae Dist. Inc.

Page 3
Date Accounts and Explanations F Debit Credit
Apr 28 R. Mendoza, Drawings L-302 Ᵽ 2,008
Cash L-101 Ᵽ 2,008 Account:
Owner's withdrawals Date
Apr. 3
2 Sales Returns and Allowances L-402 900
Cash L-101 900
 Paid return to customer

3 Accounts Receivable L-102 13,700

Sales L-401 13,700
Sold mdse-Eagle Product Corp., terms:2

Advertising Expense L-507 1,000

Utilities Expense L-508 400
Rent Expense L-509 3,500
Salaries Expense L-506 1,500 Account:
Cash L-101 6,400 Date
Paid operating expenses Apr. 4
Apr. 30

Account:
Date

Apr. 30
 Account:
Date
Apr. 5

Note: Things to remember when journalizing -

a) Always put peso sign - first journal entry per page
b) Always put year e.g. 2016 - 1st page of journal
c) Always put month and day per page of journal - 1st line, 2nd line up to the last line - day only
d) Always put the ledger account number as folio or posting reference under column "F" or "P.R."
e) Always leave one space after journal entry up to the last one

Account:
Date

Apr. 30

Account:
Date
Apr. 30
Account:
Date
Apr. 13

Account:
Date
Apr. 15
Apr. 30

Account:
Date
Account:
Date
Apr. 28

Account:
Date
Apr. 29
Account:
Date
Apr. 30

Account:
Date
Apr. 30

Account:
 Date
Apr. 30

Account:
Date
Apr. 30

Account:
Date
Apr. 30
Procedures to fol
1. All journal entr
general ledgers, lo
2. The debit amou
credit side.
3. Fill-up the folio
journal write also
4. Follow the proc

Steps to follow to
1. After completin
last amount. Do t
erasures if the fig

In a computerized
2. For single debit
3. Extract the diffe
column beside th
last debit entry. T
4. At all times, exe
edgers) If T- Accou

Cash Account No. 101

Explanation F Debit Date Explanation F Credit Apr. 1
J-1 Ᵽ 39,00 Apr. 2 J-1 Ᵽ 10,000 Apr. 13
J-2 14,896 Apr. 2 J-1 300 Apr. 16
J-2 200,000 Apr. 3 J-1 700 Apr. 17
J-2 500 Apr. 5 J-1 200 Apr. 23
J-2 16,400 Apr. 11 J-2 15,288
Apr. 14 J-2 14,400
Apr. 15 J-2 1,500
Apr. 20 J-2 700
Apr. 26 J-2 12,300
Apr. 27 J-2 9,000
Apr. 28 J-3 2,008
Apr. 29 J-3 900
Apr. 30 J-3 6,400
Balance Ᵽ197,100 Balance

R. Mendoza, Capital Account No. 301

Explanation F Debit Date Explanation F Credit Apr. 30
Ᵽ 10,2 Apr. 1 Investment J-1 Ᵽ 39,000
2,008
Balance Ᵽ26,708
Office Equipment Account No. 105
Explanation F Debit Date Explanation F Credit Apr. 2
J-1 Ᵽ 10,000 Balance

Purchases Account No. 503

Explanation F Debit Date Explanation F Credit Apr. 2
J-1 Ᵽ 15,900 Apr. 14
J-2 14,400 Apr. 18
J-2 14,200 Apr. 26
J-2 12,300 Balance Ᵽ 56,800 Balance
Balance Ᵽ 0.00 Apr. 30 Ᵽ 56,800
Freight-in Account No. 501
Explanation F Debit Date Explanation F Credit Apr. 2
J-1 Ᵽ 300 Apr. 20
J-2 700 Balance Ᵽ 1,000 Balance

Accounts Payable Account No. 201

Explanation F Debit Date Explanation F Credit Apr. 6
J-1 Ᵽ 3 Apr. 2 J-1 Ᵽ 15,900 Apr. 11
J-2 15,600 Apr. 18 J-2 14,200 Apr. 27
J-2 9,000
Balance Ᵽ 5,200

Office Supplies Account No. 103

Explanation F Debit Date Explanation F Credit Apr. 3
J-1 Ᵽ 700
Accounts Receivable Account No. 102
Explanation F Debit Date Explanation F Credit Apr. 4
J-1 Ᵽ 15,20 Apr. 13 J-2 Ᵽ 15,200 Apr. 30
J-3 13,700 Balance Ᵽ 13,700
Balance

Sales Account No. 401

Explanation F Debit Date Explanation F Credit Apr. 30
Apr. 4 J-1 Ᵽ 15,200
Apr. 23 J-2 16,400
Balance Ᵽ 45,300 Apr. 30 J-3 13,700
45,300 Balance Ᵽ0
 Freight-out Account No. 502
Explanation F Debit Date Explanation F Credit Apr. 5
J-1 Ᵽ 2 Apr. 30 Ᵽ 200
Balance Ᵽ0

only
"P.R."

Purchase Returns and Allowances Account No. 504

Explanation F Debit Date Explanation F Credit Apr. 30
Apr. 6 J-1 Ᵽ 300
Balance Ᵽ 800 Apr. 17 J-2 500
800 Balance Ᵽ 0

Purchase Discount Account No. 505

Explanation F Debit Date Explanation F Credit Apr. 30
Ᵽ 3 Apr. 11 J-2 Ᵽ 312
Balance Ᵽ 0
Sales Discount Account No. 403
Explanation F Debit Date Explanation F Credit Apr. 13
J-2 Ᵽ 304 Apr. 30 Ᵽ 304
Balance Ᵽ 0

Salaries Expense Account No. 506

Explanation F Debit Date Explanation F Credit Apr. 15
J-2 Ᵽ 1,500 Apr. 30
J-3 1,500 Balance Ᵽ 3,000 Balance
Balance Ᵽ 0 Apr. 30 3,000

Notes Payable Account No. 202

Explanation F Debit Date Explanation F Credit
 Apr. 16 J-2 Ᵽ 200,000

R. Mendoza, Drawings Account No. 302

Explanation F Debit Date Explanation F Credit Apr. 28
J-1 Ᵽ 2,00 Apr. 30 Ᵽ 2,008
Balance Ᵽ 0

Sales Returns and Allowances Account No. 402

Explanation F Debit Date Explanation F Credit Apr. 29
J-3 Ᵽ 9 Apr. 30 Ᵽ 900
Balance Ᵽ 0
Advertising Expense Account No. 507
Explanation F Debit Date Explanation F Credit Apr. 30
J-3 Ᵽ 1,0 Apr. 30 Ᵽ 1,000
Balance Ᵽ 0

Utilities Expense Account No. 508

Explanation F Debit Date Explanation F Credit Apr. 30
J-3 Ᵽ 4 Apr. 30 Ᵽ 400
Balance Ᵽ 0

Rent Expense Account No. 509

 Explanation F Debit Date Explanation F Credit Apr. 30
J-3 Ᵽ 3,5 Apr. 30 Ᵽ 3,500
Balance Ᵽ 0

Merchandise Inventory Account No. 104

Explanation F Debit Date Explanation F Credit Apr. 30
J-1 Ᵽ 25,000 J-1

Income Summary Account No. 303

Explanation F Debit Date Explanation F Credit Apr. 30
J-1 Ᵽ 81,6 Apr. 30 J-1 Ᵽ 71,412
Balance Ᵽ 0 10,284
to follow in posting:
l entries are posted in the ledger. Stgart with the first debit and credit entries. From the
ers, look for the correct account titles.
amount is posted on the debit side of the ledger while the credit amount is posted on the

folio column of the ledger by placing the name of the journal and the page (Ex. J-1). In the
e also in the folio column the ledger code or number. Ex. L-101.
e procedures as you post all the journal entries.

ow to determine the balance of the ledger:

pleting the posting, foot the debit columns and write in small figures in pencil underneath the
Do the same to the credit columns. This is known as pencil footing. Writing in pencil will allow
he figures are incorrect.

erized working environment, pencil footing is unnecessary.

debit or credit posting, no need to pencil foot.
e difference. If it is a debit balance write in small pencil figure the balance in the explanation
de the last credit entry. For credit balance, write the balance in the explanation beside the
try. There is no need to extract the difference or balance for single posting.
s, exercise care in recording, posting and in pencil footing to avoid errors.
ount is used instead of ledger

Cash
Ᵽ 39,000 Apr. 2 Ᵽ 10,000
14,896 Apr. 2 300 Account Titles
200,000 Apr. 3 700 Cash
500 Apr. 5 200 Accounts Receivable
16,400 Apr. 11 15,288 Office Supplies
Apr. 14 14,400 Office Equipment
Apr. 15 1,500 Accounts Payable
Apr. 20 700 Notes Payable
Apr. 26 12,300 R. Mendoza, Capital
Apr. 27 9,000 R. Mendoza, Drawing
Apr. 28 2,008 Sales
Apr. 29 900 Sales Discount
271188 Apr. 30 6,400 Sales Returns and All
Ᵽ 541,984 Ᵽ 73,696 Advertising Expense
Ᵽ 468,288 Freight-in
Freight-out
Purchases
Purchase Returns and
Purchase Discount
Rent Expense
Salaries Expense
Utilities Expense
Totals

R. Mendoza, Capital Adjusting Entries

Ᵽ 10,284 Apr. 1 Ᵽ 39,000
2,008 Balance Ᵽ 39,000 Note: (No adjusting entries. One p
12,292 39,000 to operate as a merchandisin
Balance 26,708 were few business transaction
adjusting entries during the fi
 No beginning inventory fo
during closing of books (closi

State

Sales
Office Equipment Sales Discount
Ᵽ 10,000 Sales Returns and All
Ᵽ 10,000 Net Sales
Less: Cost of Sales
Purchases
Less: Purch. Re
Purchase
Net Purchas
Add: Freight-in
Goods Available
Less: Mdse. Invt
Gross Profit
Less: Operating Expe
Advertising Expense
Purchases Freight-out
Ᵽ 15,900 Apr. 30 Ᵽ 56,800 Rent Expense
14,400 Salaries Expense
14,200 Utilities Expense
12,300 Net Income
Ᵽ 56,800
56,800 56,800
Ᵽ 0
Sta

Current Assets
Cash
 Freight-in Accounts Receivable
Ᵽ 300 Apr. 30 Ᵽ 1,000 Office Supplies
700 Merchandise Invento
Ᵽ 1,000 Non Current Assets
1,000 1,000 Office Equipment
Ᵽ 0 Total Assets

Current Liabilities
Accounts Payable
Non Current Liabilities
Notes Payable
Total Liabilities

R. Mendoza, Capital
Accounts Payable Add: Net Income
Ᵽ 300 Apr. 2 Ᵽ 15,900 Less: R. Mendoza, Drawin
15,600 Apr. 18 14,200 Total Liabilties and Owner
9,000
Ᵽ 24,900 Ᵽ 30,100
Balance Ᵽ 5,200

Closing Entries:

Apr. 30 Income Summary

Sales Discount
Sales Returns an
Advertising expe
Freight-in
Freight-out
Purchases
Office Supplies Rent Expense
Ᵽ 700 Salaries Expense
Utilities Expense
To close nomi
 Merchandise Invento
Sales
Purchase Returns and
Purchase Discount
Income Summ
To set up en
nominal accounts w

Income Summary
Accounts Receivable R. Mendoza, Ca
Ᵽ 15,200 Apr. 13 Ᵽ 15,200 To close incom
13,700
Ᵽ 28,900 Ᵽ 15,200 (Note: the balance o
Ᵽ 13,700 should tally w
or statement

R. Mendoza, Capital
R. Mendoza, Draw
To close drawi

Sales Note: After closing e

Ᵽ 45,300 Apr. 4 Ᵽ 15,200 to be updated to tall
Apr. 23 16,400 balance.
Apr. 30 13,700
Balance Ᵽ 45,300 Same with the adjus
Ᵽ 45,300 Ᵽ 45,300 should be updated.
Ᵽ 0 the balances of finan
Balance and Post Clo
 Freight-out
Ᵽ 200 Apr. 30 Ᵽ 200
Ᵽ 0

Purchase Returns and Allowances

Ᵽ 800 Apr. 6 Ᵽ 300
Apr. 17 500
Balance Ᵽ 800
Ᵽ 800 Ᵽ 800
Ᵽ 0

Purchase Discount
Ᵽ 312 Apr. 11 Ᵽ 312
Ᵽ 0
 Sales Discount
Ᵽ Ᵽ 304 Apr. 30 Ᵽ Ᵽ 304
Ᵽ 0

Salaries Expense
Ᵽ 1,500 Apr. 30 Ᵽ 3,000
1,500
Ᵽ 3,000
3,000 3,000
Ᵽ 0

Notes Payable
Apr. 16 Ᵽ 200,000
 R. Mendoza, Drawings
Ᵽ 2,008 Apr. 30 Ᵽ 2,008
Ᵽ 0

Sales Returns and Allowances

Ᵽ 900 Apr. 30 Ᵽ 900
Ᵽ 0
 Advertising Expense
Ᵽ 1,000 Apr. 30 Ᵽ 1,000
Ᵽ 0

Utilities Expense
Ᵽ 400 Apr. 30 Ᵽ 400
Ᵽ 0

Rent Expense
 Ᵽ 3,500 Apr. 30 Ᵽ 3,500
Ᵽ 0

Merchandise Inventory, End

Ᵽ 25,000

Income Summary
Ᵽ 81,696 Apr. 30 Ᵽ 71,412
Balance 10,284 Apr. 30 Ᵽ 10,284
Ᵽ 0
 MODEM CORPORATION
TRIAL BALANCE
April 30, 2016
No. Account Title
Debits Credits
Ᵽ 197,100 Cash Ᵽ
able 13,700 Accounts Receivable
700 Office Supplies
t 10,000 Office Equipment
e Ᵽ 5,200 Accounts Payable
200,000 Notes Payable
ital 39,000 R. Mendoza, Capital
wings 2,008 R. Mendoza, Drawings
45,300 Sales
304 Sales Discount
d Allowances 900 Sales Returns & Allow
nse 1,000 Advertising Expense
1,000 Freight-in
200 Freight-out
56,800 Purchases
s and Allowances 800 Purch. Ret. And Allow
nt 312 Purchase Discount
3,500 Rent Expense
3,000 Salaries Expense
400 Utilities Expense
Ᵽ 290,612 Ᵽ 290,612 Totals Ᵽ
Mdse Invty, end

Net Loss

ne possible reason is that it was incorporated on April 1, 2016

dising business. April is the first month of operation hence, there
ctions. However, it does not necessarily mean that there will be no
he first month of operation.
ry for same above reason. Ending inventory will be adjusted
closing entries).

MODEM CORPORATION
tatement of Comprehensive Income
For the month ended April 2016

Ᵽ 45,300
Ᵽ 304
d Allowances 900 1,204
Ᵽ 44,096
es
56,800
h. Ret. & 800
hase Dis 312 1,112
rchases 55,688
t-in 1,000
able for Sale 56,688
Invty., end 25,000 31,688
Ᵽ 12,408
Expenses
nse 1,000
200
3,500
3,000
400 8,100
Ᵽ 4,308

MODEM CORPORATION
Statement of Financial Position
As of April 30, 2016

ASSETS

Ᵽ 197,100
able 13,700
700
entory, end 25,000 Ᵽ 236,500

t 10,000
Ᵽ 246,500

LIABILITIES AND OWNER'S EQUITY

e Ᵽ 5,200
s
200,000
Ᵽ 205,200

Ᵽ 39,000
4,308 Ᵽ 43,308
awings 2,008 Ᵽ 41,300
wner's Equity Ᵽ 246,500

y 67,104
unt 304
ns and Allowances 900
expense 1,000
1,000
200
56,800
se 3,500
ense 3,000
ense 400
nominal accounts with debit balances
entory, En Ᵽ 25,000
45,300
s and Allowances 800
nt 312
ummary Ᵽ 71,412
p ending inventory and close
ts with credit balances

y 4,308
a, Capital 4,308
come summary to capital

ce of the income summary to be closed to capital account

ally with either net income or net loss of the income statement
ment of comprehensive income)

ital 2,008
Drawings 2,008
rawing account to capital

ing entries, ledgers and or T- accounts need

o tally with the balances of post closing trial

djusting entries if any, ledgers and or T-Accounts

ed. Their balances should always tally with
financial statements and trial balances (adjusted Trial
t Closing Trial Balance)
 Modem Corporation
Worksheet
For the month ending April 2016
Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sh
Debit Credit Debit Credit Debit Credit Debit Credit Debit
197,100 Ᵽ 182,508 Ᵽ 197,100
13,700 13,700 13,700
700 700 700
10,000 10,000 10,000
Ᵽ 5,200 Ᵽ 5,200 Ᵽ
200,000 200,000
39,000 39,000
2,008 2,008 2,008
45,300 45,300 45,300
304 14,896 304
900 900 900
1,000 1,000 1,000
1,000 1,000 1,000
200 200 200
56,800 56,800 56,800
800 800 800
312 312 312
3,500 3,500 3,500
3,000 3,000 3,000
400 400 400
290,612 Ᵽ 290,612 Ᵽ 290,612 Ᵽ 290,612
25,000 25,000

4,308
Ᵽ 71412 Ᵽ 71412 Ᵽ 248,508 Ᵽ

Note: Note: Note: Note: Note:

Balances of accounts Adjusting entries Adjusted trial Only temporary Only real or pe
under trial balance if any, should always balance are or nominal accounts accounts can b
(Unadjusted Trial have either a small balances after can be found in the in the balance
Balance) are based letter or a number the adjustments income statement or or statement o
from the ledger both under the debit (adjusting entries). statement of compre- financial positi
balances and or and credit side prior to hensive income.
T-Accounts . the amount so as
the understand the these nominal accounts
pairing of accounts will be closed or be zero
and the adjustments balance at the end of
made to the the accounting period.
affected accounts

All debits should tally with all credits

 MODEM CORP
Statement of
For Month E

Sheet Post Closing Trial Balance

Credit Debit Credit Cash Flows from Operating Activities
Ᵽ 197,100 Receipts
13,700 Collection from customers on account
700 Cash refund for returned mdse
10,000 Cash sale from customers
5,200 Ᵽ 5,200 Payments
200,000 200,000 Paid freight
39,000 41,300 Payment to suppliers on account
cash purchase of merchandise
Payment of salaries
purchase of office supplies
cash refund to customers
paid advertisement
paid utiltiies
paid rent
Net Cash from Operating Activities
Cash Flows from Investing Activities
Payments
For purchase of equipment
Net cash from Investing Activities
Cash Flows from Financing Activities
Receipts
25,000 Cash investment of owner
proceeds of loan
4,308 Payments
248508 Ᵽ 246500 Ᵽ 246500 cash withdrawal of owner
Net cash from Financing Activities
Net Increase/Decrease in Cash
Note: During post-closing Cash Balance - beg.
r permanent trial balance, only the real Cash Balance - Apr. 30, 2016
an be found or permanent accounts
nce sheet have balances, all the nominal
nt of or temporary accounts have
osition zero balances. These balances
will be the ending balances
of this accounting period which
will be the beginning balances
of the next accounting period.
M CORPORATION
ent of Cash Flows
onth Ended April, 2016

Ᵽ ###
500.00
###

- 1,200.00
###
###
- 3,000.00
- 700.00
- 900.00
- 1,000.00
- 400.00
- 3,500.00
Ᵽ ###

Ᵽ ###
###

Ᵽ ###
###

- 2,008.00
###
Ᵽ ###
-
Ᵽ ###
Problem:

The following are selected transactions for the month of December, 2016 Lucio Ong Company’s first month.
1.    Lucio Ong, the owner, began the business by depositing P120,000 cash in the name of the business.
2.       Acquired computer equipment for P45,000, paying P10,000 in cash and giving a note payable for the remai
3.       Purchased supplies on credit, P30,000.
4.       Paid P36,000 office rent for three months.
5.       Purchased merchandise for resale by paying P20,000 cash.
6.       Bought office furniture for P15,000 cash.
7.       Purchased on account merchandise for resale for P8,000; terms were 2/15, n/30. The supplier paid a P300
8.       Returned merchandise costing P500 (part of the P8,000 purchase)
9.       Sold merchandise on account costing P18,000 for P25,000; terms were 2/10, n/30. The company shouldere
10.   Customer returned merchandise costing P360 that had been sold on account for P500.
11.   Received payment from customer for merchandise sold above. The payment was made within the discount
12.   Paid for merchandise purchased, including the shipping cost. The payment was made 13 days from the date
13.   Paid electric and water bill of P1,600 and telephone bill of P1,200.
14.   Withdrew cash for personal use, P12,000.
15.   Sold merchandise on account costing P3,600 for P5,000; terms were 2/10, n/30.

Additional information:
a.       On December 31, a physical count of inventory is taken, and it is revealed that the actual inventory on hand
b.      Unused supplies amount to P27,500.
c.       Property and Equipment are estimated to have a useful life of ten years. Residual value is 5% of cost for equ
d.      The notes payable is a 12% 90-day note, dated December 1.

Required:
1. Journalize the transactions. The company uses Asset Method in recording prepayments and Perpetual Inventory system
in recording changes in Inventory Account.
2. Prepare the necessary adjusting entries on December 31.
ame of the business.
note payable for the remainder.

0. The supplier paid a P300 freight charge; shipping terms were FOB shipping point, freight prepaid.

30. The company shouldered and paid the shipping cost amounting to P200.

s made within the discount period.

made 13 days from the date of purchase.

he actual inventory on hand is P6,100.

al value is 5% of cost for equipment and 3% for furniture and fixtures.

erpetual Inventory system

(Solution: Perpetual Method)

Lucio Ong Company

Chart of Accounts

101 Cash 301 L. Ong, Capital

102 Accounts Receivable 302 L. Ong, Drawings
103 Supplies 303 Income Summary
104 Prepaid Rent 401 Sales
105 Merchandise Inventory 402 Sales Returns and Allowances
106 Computer Equipment 403 Sales Discount
107 Furniture and Fixture 501 Cost of Sales
108 Acc. Dep.-Comp. Eqpt. 502 Depreciation Expense
109 Acc. Dep.-Fur. And Fix. 503 Freight-out
201 Accounts Payable 504 Interest Expense
202 Interest Payable 505 Rent Expense
203 Notes Payable 506 Supplies Expense
507 Utilities Expense

Journal Entries: (Using General Journal) Page 1

Date Accounts and Explanations F Debit Credit
2016
Dec. 1 Cash Ᵽ 120,000
L. Ong, Capital Ᵽ 120,000
Owner's investment

Dec. 2 Computer Equipment 45,000

Cash 10,000
Notes Payable 35,000
Purchased computer eqpt.

Dec. 3 Supplies 30,000

Accounts Payable 30,000
Purchased supplies on account

Dec. 4 Prepaid Rent Expense 36,000

Cash 36,000
 Paid rental in advance

Dec. 5 Merchandise Inventory 20,000

Cash 20,000
Purchase merchandise on cash basis

Dec. 6 Furniture and Fixtures 15,000

Cash 15,000
Purchased furnitures on cash basis.

Dec. 7 Merchandise Inventory 8,000

Accounts Payable 8,000
Purchased merchandise on account.

Page 2
Date Accounts and Explanations F Debit Credit
Dec. 7 Merchandise Inventory Ᵽ 300
Accounts Payable Ᵽ 300
Delivery charges on mdse purchased

Dec. 8 Accounts Payable 500

Merchandise Inventory 500
Retturned merchandise

Dec. 9 Accounts Receivable 25,000

Sales 25,000
Sales on account

Cost of Sales 18,000

Merchandise Inventory 18,000
To update the inventory

Freight-out 200
Cash 200
Paid delivery charges

Dec. 10 Sales Returns and Allowances 500

Accounts Receivable 500
Returned merchandise

Merchandise Inventory 360

Cost of Sales 360
Update inventory
Dec. 11 Cash 24,010
Sales Discount 490
Accounts Receivable 24,500
Payment from customer within discount period

Dec. 12 Accounts Payable 7,800

Merchandise Inventory 150
Cash 7,650
Payment made on mdse purchased on account

Dec. 13 Utilities Expense 2,800

Cash 2,800
Paid utilities

Dec. 14 L. Ong, Drawings 12,000

Cash 12,000
Owner's withdrawals

Page 3
Date Accounts and Explanations F Debit Credit
Dec. 15 Accounts Receivable 5,000
Sales 5,000
Sales on account

Cost of Sales 3,600

Merchandise Inventory 3,600
To update the inventory

Adjusting Entries:

a) Cost of Sales 310

Merchandise Inventory 310
To update the inventory

b) Supplies Expense 2,500

Supplies 2,500
Supplies used

c) Depreciation Expense 477.5

Accum. Depreciation - Computer Equipment 356.25
Accum. Depreciation - Furniture and Fixtures 121.25
To set up the depreciation expense
 d) Interest Expense 350
Interest Payable 350
Interest expense for the month

e) Rent Expense 12,000

Prepaid Rent Expense 12,000
Rent expense for the month

Note: Things to remember when journalizing -

a) Always put peso sign - first journal entry per page
b) Always put year e.g. 2016 - 1st page of journal
c) Always put month and day per page of journal - 1st line, 2nd line up to the last line - day only
d) Always put the ledger account number as folio or posting reference under column "F" or "P.R."
e) Always leave one space after journal entry up to the last one
(Posting to ledgers)

Account: Cash
Date Explanation F Debit Date Explanation
Dec. 1 J-1 Ᵽ120,000.00 Dec. 2
Dec. 11 J-2 24,010.00 Dec. 4
Dec. 5
Dec. 6
Dec. 9
Dec. 12
Dec. 13
Dec. 14
Balance Ᵽ40,360

Account: Accounts Receivable

Date Explanation F Debit Date Explanation
Dec. 9 J-2 Ᵽ 25,000.00 Dec. 10
Dec. 15 J-3 5,000.00 Dec. 11
Balance Ᵽ5,000

Account: Merchandise Inventory

Date Explanation F Debit Date Explanation
Dec. 5 J-1 Ᵽ 20,000.00 Dec. 8
Dec. 7 J-1 8,300.00 Dec. 9
Dec. 10 J-2 360.00 Dec. 12
Dec. 15
Dec. 31
Balance Ᵽ6,100
Account: Supplies
Date Explanation F Debit Date Explanation
Dec. 3 J-1 Ᵽ 30,000.00 Dec. 31
Balance Ᵽ27,500

Account: Prepaid Rent Expense

Date Explanation F Debit Date Explanation
Dec. 4 J-1 Ᵽ 36,000.00 Dec. 31
Balance Ᵽ 24,000.00

Account: Computer Equipment

Date Explanation F Debit Date Explanation
Dec. 2 J-1 Ᵽ 45,000.00 Balance Ᵽ45,000.00

Account: Acc. Depreciation - Equipment

Date Explanation F Debit Date Explanation
Balance Ᵽ356.25 Dec. 31
Account: Furniture and Fixtures
Date Explanation F Debit Date Explanation
Dec. 6 J-1 Ᵽ 15,000.00 Balance Ᵽ 15,000.00

Account: Accum. Depn. - Furniture and Fixtures

Date Explanation F Debit Date Explanation
Balance Ᵽ 121.25 Dec. 31

Account: Accounts Payable

Date Explanation F Debit Date Explanation
Dec. 8 J-1 Ᵽ 500.00 Dec. 3
Dec. 12 7,800.00 Dec. 7
Balance Ᵽ30,000.00
Account: Notes Payable
Date Explanation F Debit Date Explanation
Balance Ᵽ 35,000.00 Dec. 2

Account: Interest Payable

Date Explanation F Debit Date Explanation
Balance Ᵽ 350 Dec. 31

Account: L. Ong, Capital

Date Explanation F Debit Date Explanation
Dec. 31 J-3 Ᵽ 12,000.00 Dec. 1
Dec. 31 Balance Ᵽ 97,132.50 J-3 10,867.50
Account: L. Ong, Drawings
Date Explanation F Debit Date Explanation
Dec. 14 J-2 Ᵽ 12,000.00 Dec. 31

Account: Sales
Date Explanation F Debit Date Explanation
Dec. 31 J-3 Ᵽ 30,000.00 Dec. 9
Dec. 15

Account: Sales Discount

Date Explanation F Debit Date Explanation
Dec. 11 J-2 Ᵽ 490.00 Dec. 31
Account: Sales Returns and Allowances
Date Explanation F Debit Date Explanation
Dec. 10 J-2 Ᵽ 500.00 Dec. 31

Account: Cost of Sales

Date Explanation F Debit Date Explanation
Dec. 9 J-2 Ᵽ 18,000.00 Dec. 10
Dec. 15 J-3 3,600.00
Dec. 31 J-3 310.00 Dec. 31

Account: Freight-out
Date Explanation F Debit Date Explanation
Dec. 9 J-2 Ᵽ 200.00 Dec. 31

Account: Utilities Expense

 Date Explanation F Debit Date Explanation
Dec. 13 J-2 Ᵽ 2,800.00 Dec. 31

Account: Supplies Expense

Date Explanation F Debit Date Explanation
Dec. 31 J-3 Ᵽ 2,500.00 Dec. 31

Account: Depreciation Expense

Date Explanation F Debit Date Explanation
Dec. 31 J-3 Ᵽ 477.50 Dec. 31

Account: Interest Expense

Date Explanation F Debit Date Explanation
Dec. 31 J-3 Ᵽ 350.00 Dec. 31
Account: Rent Expense
Date Explanation F Debit Date Explanation
Dec. 31 J-3 Ᵽ 12,000.00 Dec. 31

Account: Income Summary

Date Explanation F Debit Date Explanation
Dec. 31 J-3 Ᵽ 40,867.50 Dec. 31

3. Fill-up the folio column of the ledger by placing the name of the journal and the page (Ex. J-1). In the
journal write also in the folio column the ledger code or number. Ex. L-101.
4. Follow the procedures as you post all the journal entries.

Steps to follow to determine the balance of the ledger:

1. After completing the posting, foot the debit columns and write in small figures in pencil underneath the
last amount. Do the same to the credit columns. This is known as pencil footing. Writing in pencil will allow
erasures if the figures are incorrect.

In a computerized working environment, pencil footing is unnecessary.

2. For single debit or credit posting, no need to pencil foot.
3. Extract the difference. If it is a debit balance write in small pencil figure the balance in the explanation
column beside the last credit entry. For credit balance, write the balance in the explanation beside the
last debit entry. There is no need to extract the differene or balance for single posting.
4. At all times, exercise care in recording, posting and in pencil footing to avoid errors.
 If T- Account is used instead of ledger

Account No. 101

F Credit CASH
J-1 Ᵽ 10,000.00 Dr. Cr.
J-1 36,000.00 Dec. 1 Ᵽ 120,000.00 Dec. 2 Ᵽ 10,000.00
J-1 20,000.00 11 24,010.00 4 36,000.00
J-1 15,000.00 5 20,000.00
J-2 200.00 6 15,000.00
J-2 7,650.00 9 200.00
J-2 2,800.00 12 7,650.00
J-2 12,000.00 13 2,800.00
14 12,000.00
Ᵽ 144,010.00 Ᵽ 103,650.00
Ᵽ 40,360.00

Account No. 102 ACCOUNTS RECEIVABLE

F Credit Dec. 9 Ᵽ 25,000.00 Dec. 10 Ᵽ 500.00
J-2 Ᵽ 500.00 15 5,000.00 11 24,500.00
J-2 24,500.00 Ᵽ 30,000.00 Ᵽ 25,000.00
Ᵽ 5,000.00

Account No. 105 MERCHANDISE INVENTORY

F Credit Dec. 5 Ᵽ 20,000.00 Dec. 8 Ᵽ 500.00
J-2 Ᵽ 500.00 7 8,300.00 9 18,000.00
J-2 18,000.00 10 360.00 12 150.00
J-2 150.00 15 3,600.00
J-3 3,600.00 Ᵽ 28,660.00 Ᵽ 22,250.00
J-3 310.00 Ᵽ 6,410.00
Dec. 31 a) 310.00
Ᵽ 6,100.00
Account No. 103 SUPPLIES
F Credit Dr. Cr.
Ᵽ 2,500.00 Dec. 3 Ᵽ 30,000.00 Dec. 31 b) Ᵽ2,500.00
Ᵽ 27,500.00

Account No. 104 PREPAID RENT

F Credit Dec. 4 Ᵽ 36,000.00 Dec. 31 e) Ᵽ12,000.00
J-3 Ᵽ 12,000.00 Ᵽ 24,000.00

Account No. 106 COMPUTER EQUIPMENT

F Credit Dr. Cr.
Dec. 2 Ᵽ 45,000.00

Account No. 108 ACCUM. DEPN - COMPUTER EQPT

F Credit Dec. 31 c) Ᵽ 356.25
J-3 Ᵽ 356.25
 2016
Account No. 107 FURNITURE AND FIXTURES Dec. 31
F Credit Dec. 6 Ᵽ 15,000.00

Account No. 109 ACCUM. DEP. - FURNITURE & FIXTURES

F Credit Dec. 31 c) Ᵽ 121.25
J-3 Ᵽ 121.25

Account No. 201 ACCOUNTS PAYABLE

F Credit Dr. Cr.
Ᵽ 30,000.00 Dec. 8 Ᵽ 500.00 Dec. 3 Ᵽ 30,000.00
8,300.00 Dec. 12 7,800.00 Dec. 7 8,300.00
Ᵽ 8,300.00 38,300.00
Ᵽ 30,000.00
Account No. 203 NOTES PAYABLE
F Credit Dr. Cr.
J-1 Ᵽ 35,000.00 Dec. 2 Ᵽ35,000.00

Account No. 202 INTEREST PAYABLE

F Credit Dec. 31 d) Ᵽ 350.00
J-3 Ᵽ 350.00

Account No. 301 L. ONG, CAPITAL

F Credit Dr. Cr.
J-1 Ᵽ 120,000.00 Dec. 31 Ᵽ 12,000.00 Dec. 1 Ᵽ120,000.00
10,867.50
Ᵽ 22,867.50 Ᵽ 120,000.00
Ᵽ 97,132.50
Account No. 302 L. ONG, DRAWINGS
F Credit Dec. 14 Ᵽ 12,000.00 Dec. 31 Ᵽ 12,000.00
J-3 Ᵽ 12,000.00 0

Account No. 401 SALES

F Credit Dr. Cr.
J-1 Ᵽ 25,000.00 Dec. 31 Ᵽ 30,000.00 Dec. 9 Ᵽ 25,000.00
J-3 5,000.00 Dec. 15 5,000.00
Ᵽ 30,000.00 Ᵽ 30,000.00
0

Account No. 402 SALES DISCOUNT

F Credit Dec. 11 Ᵽ 490.00 Dec. 31 Ᵽ 490.00
J-3 Ᵽ 490.00 0
Account No. 402 SALES RETURNS AND ALLOWANCES
F Credit Dr. Cr.
J-3 Ᵽ 500.00 Dec. 10 Ᵽ 500.00 Dec. 31 Ᵽ 500.00
0

Account No. 501 COST OF SALES

F Credit Dr. Cr.
J-2 Ᵽ 360.00 Dec. 9 Ᵽ 18,000.00 Dec. 10 360.00
Dec. 15 3,600.00
J-3 21,550.00 21,600.00 Ᵽ 360.00
21,240.00
Dec. 31 a) 310.00
Ᵽ 21,550.00 Dec. 31 21,550.00
0

Account No. 503 FREIGHT OUT

F Credit Dec. 9 Ᵽ 200.00 Dec. 31 Ᵽ 200.00
J-3 Ᵽ 200.00 0

Account No. 507 UTILITIES EXPENSE

 F Credit Dec. 13 Ᵽ 2,800.00 Dec. 31 Ᵽ 2,800.00
J-3 Ᵽ 2,800.00 0

Account No. 506 SUPPLIES EXPENSE

F Credit Dec. 31 b) Ᵽ 2,500.00 Dec. 31 Ᵽ 2,500.00
J-3 Ᵽ 2,500.00 0

Account No. 502 DEPRECIATION EXPENSE

F Credit Dec. 31 c) Ᵽ 477.50 Dec. 31 Ᵽ 477.50
J-3 Ᵽ 477.50 0

Account No. 504 INTEREST EXPENSE

F Credit Dec. 31 d) Ᵽ 350.00 Dec. 31 Ᵽ 350.00
J-3 Ᵽ 350.00 0
 Account No. 505 RENT EXPENSE
F Credit Dec. 31 e) Ᵽ 12,000.00 Dec. 31 Ᵽ 12,000.00
J-3 Ᵽ 12,000.00 0

Account No. 303 INCOME SUMMARY

F Credit Dec. 31 Ᵽ 40,867.50 Dec. 31 Ᵽ 30,000.00
J-3 Ᵽ 30,000.00 Dec. 31 10,867.50
10,867.50 Ᵽ 40,867.50 Ᵽ 40,867.50
0

erneath the
encil will allow
 LUCIO ONG COMPANY
TRIAL BALANCE
December 31, 2016

Account Titles Debits

Cash Ᵽ 40,360.00
Accounts Receivable 5,000.00
Merchandise Inventory 6,410.00
Supplies 30,000.00
Prepaid Rent 36,000.00
Computer Equipment 45,000.00
Furniture and Fixtures 15,000.00
Accounts Payable
Notes Payable
L. Ong, Capital
L. Ong, Drawing 12,000.00
Sales
Sales Discount 490.00
Sales Return and Allow 500.00
Cost of Sales 21,240.00
Freight out 200.00
Utilities Expense 2,800.00
Totals Ᵽ 215,000.00

LUCIO ONG COMPANY

Statement of Comprehensive Income
For the month ended December 2016

Sales Ᵽ 30,000.00
Sales Discount 490.00
Sales Return and Allow 500.00 990.00
Net Sales Ᵽ 29,010.00
Cost of Sales 21,550.00
Gross Profit Ᵽ 7,460.00

Freight out 200.00

Utilities Expense 2,800.00
 Supplies Expense 2,500.00
Depreciation Expense 477.50
Interest Expense 350.00
Rent Expense 12,000.00 18,327.50
Net Loss Ᵽ - 10,867.50

LUCIO ONG COMPANY

Statement of Financial Position
As of December 31, 2016

ASSETS

Cash Ᵽ 40,360.00
Accounts Receivable 5,000.00
Merchandise Inventory 6,100.00
Supplies 27,500.00
Prepaid Rent 24,000.00

Computer Equipment Ᵽ 45,000.00

Acc. Dep - Comp. Eqpt 356.25 Ᵽ 44,643.75
Furniture and Fixtures 15,000.00
Acc. Dep - F&F 121.25 14,878.75

LIABILITIES AND OWNER'S EQUITY

Accounts payable Ᵽ 30,000.00

Notes payable 35,000.00
Interest payable 350.00
L. Ong, Capital 120,000.00
L. Ong., Drawings 12,000.00 108,000.00
Less: Net Loss 10,867.50

Closing Entries:

Income Summary Ᵽ 40,867.50

Cost of Sales
Sales Discount
Sales Returns and Allowances
Depreciation Expense
Freight-out
Interest Expense
Rent Expense
Supplies Expense
Utilities Expense
To close the cost of sales and nominal accounts with debit balances

Sales 30,000.00
Income Summary
To close nominal accounts with credit balances

L. Ong, Capital 10,867.50

Income Summary
To close income summary to capital

(Note: the balance of the income summary to be closed to capital account

should tally with either net income or net loss of the income statement
or statement of comprehensive income)

L. Ong, Capital 12,000.00

L. Ong, Drawings
To close drawing account to capital
 Credits No. Account Titles Unadjusted Trial Balance Adjustm
DR. CR. DR.
Cash 40,360.00
Accounts Receivable 5,000.00
Merchandise Inventory 6,410.00
Supplies 30,000.00
Prepaid Rent 36,000.00
Computer Equipment 45,000.00
Acc. Dep - Comp. Eqpt
Ᵽ 30,000.00 Furniture and Fixtures 15,000.00
35,000.00 Acc. Dep - F&F
120,000.00 Accounts payable 30,000.00
Notes payable 35,000.00
30,000.00 Interest payable
L. Ong, Capital 120,000.00
L. Ong., Drawings 12,000.00
Sales 30,000.00
Sales Discount 490.00
Sales Return and Allow 500.00
Ᵽ 215,000.00 Cost of Sales 21,240.00 a
Freight Out 200.00
Utilities Expense 2,800.00
Supplies expense b
Depreciation Expense c
Interest Expense d
Rent expense e
Net Income
Balance 215,000.00 215,000.00
Ᵽ 102,960.00

59,522.50
Ᵽ 162,482.50

Ᵽ 65,350.00
 97,132.50
Ᵽ 162,482.50

Ᵽ 21,550.00
490.00
500.00
477.50
200.00
350.00
12,000.00
2,500.00
2,800.00

30,000.00

10,867.50

12,000.00
 Lucio Ong Company
Worksheet
For the Month Ending December 31, 2016
Adjustments Adjusted Trial Balance SCI
DR. CR. DR. CR. DR. CR.
40,360.00
5,000.00
a 310.00 6,100.00
b 2,500.00 27,500.00
e 12,000.00 24,000.00
45,000.00
c 356.25 356.25
15,000.00
c 121.25 121.25
30,000.00
35,000.00
d 350.00 350.00
120,000.00
12,000.00
30,000.00 30,000.00
490.00 490.00
500.00 500.00
310.00 21,550.00 21,550.00
200.00 200.00
2,800.00 2,800.00
2,500.00 2,500.00 2,500.00
477.50 477.50 477.50
350.00 350.00 350.00
12,000.00 12,000.00 12,000.00
10,867.50
15,637.50 - 15,637.50 215,827.50 215,827.50 40,867.50 40,867.50
 SFP Post closing Trial Balance Cash Flows from Operating Activities
DR. CR. DR. CR. Receipts
40,360.00 40,360.00 Collection from customers
5,000.00 5,000.00 Payments
6,100.00 6,100.00 Paid freight
27,500.00 27,500.00 Payment to suppliers on a
24,000.00 24,000.00 cash purchase of merchan
45,000.00 45,000.00 paid utiltiies
356.25 356.25 paid office rent
15,000.00 15,000.00 Net Cash from Operating Activities
121.25 121.25 Cash Flows from Investing Activities
30,000.00 30,000.00 Payments
35,000.00 35,000.00 For purchase of computer
350.00 350.00 purchase of office furniture
120,000.00 97,132.50 Net cash from Investing Activities
12,000.00 Cash Flows from Financing Activities
Receipts
Cash investment of owner
Payments
cash withdrawal of owner
Net cash from Financing Activities
Net Increase/Decrease in Cash
Cash Balance - beg.
Cash Balance - Dec. 31, 2016

10,867.50
185,827.50 185,827.50 162,960.00 162,960.00
 LUCIO ONG COMPANY
Statement of Cash Flows
For Month Ended December, 2016

rom Operating Activities

Collection from customers on account Ᵽ 24,010.00

- 200.00
Payment to suppliers on account - 7,650.00
cash purchase of merchandise - 20,000.00
paid utiltiies - 2,800.00
paid office rent - 36,000.00
m Operating Activities
rom Investing Activities

For purchase of computer equipment Ᵽ - 10,000.00

e of office furniture - 15,000.00
m Investing Activities
rom Financing Activities

Cash investment of owner Ᵽ 120,000.00

cash withdrawal of owner - 12,000.00

m Financing Activities
/Decrease in Cash

e - Dec. 31, 2016

Ᵽ - 42,640.00

- 25,000.00

108,000.00
Ᵽ 40,360.00
-
Ᵽ 40,360.00
ADJUSTING ENTRIES Note: Treat an account as an expense if used or incurred and i

1.(Prepayments- expenses already paid but not yet incurred or used)

Asset Method (Common method used)
Periodic Method
Original Entry Adjusting Entry
(at the end of the accounting period)

Prepaid Expenses XX Expense XX

Cash XX Prepaid Expenses XX

(Note: represents the expired or used portion

of the prepayment)

Expense Method (alternative method)

Periodic Method
Original Entry Adjusting Entry
(at the end of the accounting period)

Expense XX Prepaid Expense XX

Cash XX Expense XX
Paid expense To record unexpired expense

(Note: The advance payment even (Note: The amount on the adjusting journal
still not used or incurred is lodged entry represents the unexpired portion or
automatically to expense account) unused portion of the prepayment)

2. (Deferrals - Unearned or Deferred Income is income already received but not yet earne

Liability Method (Common method used)

Periodic Method
Original Entry Adjusting Entry
(at the end of the accounting period)
Cash XX Unearned Income XX
Unearned Income XX Income XX

(Note:Earned portion of the amount initially received)

Income Method (alternative method)

Periodic Method
Original Entry Adjusting Entry
(at the end of the accounting period)

Cash XX Income XX
Income XX Unearned Income XX
received cash for service to To record income not yet earned
be rendered
(Note: The amount of Adjusting Journal Entry is the
unearned portion of the amount initially received).

3. (Accrued Expenses - are expenses already incurred or used, but not yet paid)
Periodic Method
Original Entry Adjusting Entry
(at the end of the accounting period)

No Entry Expenses XX
Expenses Payable XX

e.g.
Salaries Expense
Salaries Payable

(Note: Unpaid expenses for the month.

The term "Accrued" e.g. Accrued Utilities Payable
may or may not be used. The account e.g. Utilities
Payable without the word "Accrued" is also
correct).

4. (Accrued Income - income already earned but not yet received)

 Periodic Method
Original Entry Adjusting Entry
(at the end of the accounting period)

No Entry Income Receivable XX

Income

e.g.
Interest Receivable XX
Interest Income

(Note: Income earned for the month but not yet received
The term "Accrued" e.g. Accrued Interest Receivable
may or may not be used. The account e.g. Interest
Receivable without the word "Accrued" is also
correct).

5. (Bad Debts/Doubtful Accounts/Uncollectible Accounts)

are losses due to uncollectible accounts
Periodic Method
Original Entry Adjusting Entry
(at the end of the accounting period)

No Entry Bad Debts Expense XX

Allowance for Bad Debts Expens

6. (Depreciation Expense - expense allotted for the wear and tear of property,
plant and equipment due to passage of time)
Periodic Method
Original Entry Adjusting Entry
(at the end of the accounting period)

No Entry Depreciation Expense XX

Accumulated Depreciation

(Straight line method)

Computation:
Cost XX
Less: Salvage Value XX
Depreciable Cost XX
Divided by: Estimated
Useful Life no. of yrs
Annual Depreciation XX

Note: There are other methods used

also. Computation may vary depending
on the given problem. Straight line
method is the common method used.
xpense if used or incurred and income if earned otherwise use temporarily a different account name

1.(Prepayments- expenses already paid but not yet incurred or used)

Asset Method (Common method used)
Perpetual method
Original Entry Adjusting Entry
ting period) (at the end of the accounting period)

Prepaid Expenses XX Expense XX

Cash XX Prepaid Expenses

red or used portion (Note: represents the expired or used portio

of the prepayment)

Expense Method (alternative method)

Perpetual method
Original Entry Adjusting Entry
ting period) (at the end of the accounting period)

Expense XX Prepaid Expense XX

Cash XX Expense
Paid expense To record unexpired expense

e adjusting journal (Note: The advance payment even (Note: The amount on the adjusting journa
pired portion or still not used or incurred is lodged entry represents the unexpired portion or
payment) automatically to expense account) unused portion of the prepayment)

eived but not yet earne 2. (Deferrals - Unearned or Deferred Income is income already received but not yet

Liability Method (Common method used)

Perpetual method
Original Entry Adjusting Entry
ting period) (at the end of the accounting period)
 Cash XX Unearned Income XX
Unearned Income XX Income

he amount initially received) (Note:Earned portion of the amount initially

Perpetual method
Original Entry Adjusting Entry
ting period) (at the end of the accounting period)

Cash XX Income XX
Income XX Unearned Income
yet earned received cash for service to To record income not yet earned
be rendered
usting Journal Entry is the (Note: The amount of Adjusting Journal En
amount initially received). unearned portion of the amount initially r

not yet paid) 3. (Accrued Expenses - are expenses already incurred or used, but not yet paid)
Perpetual method
Original Entry Adjusting Entry
ting period) (at the end of the accounting period)

No Entry Expenses XX
Expenses Payable

e.g.
Salaries Expense
Salaries Payable

or the month. (Note: Unpaid expenses for the month.

Accrued Utilities Payable The term "Accrued" e.g. Accrued Utilities P
The account e.g. Utilities may or may not be used. The account e.g.
d "Accrued" is also Payable without the word "Accrued" is also
correct).

4. (Accrued Income - income already earned but not yet received)

 Perpetual method
Original Entry Adjusting Entry
ting period) (at the end of the accounting period)

No Entry Income Receivable

XX Income

e.g.
Interest Receivable
XX Interest Income

the month but not yet received. (Note: Income earned for the month but n
Accrued Interest Receivable The term "Accrued" e.g. Accrued Interest R
The account e.g. Interest may or may not be used. The account e.g.
ord "Accrued" is also Receivable without the word "Accrued" is
correct).

5. (Bad Debts/Doubtful Accounts/Uncollectible Accounts)

are losses due to uncollectible accounts
Perpetual method
Original Entry Adjusting Entry
ting period) (at the end of the accounting period)

No Entry Bad Debts Expense

XX Allowance for Bad Debts Expens

of property, 6. (Depreciation Expense - expense allotted for the wear and tear of property,
plant and equipment due to passage of time)
Perpetual method
Original Entry Adjusting Entry
ting period) (at the end of the accounting period)

No Entry Depreciation Expense

XX Accumulated Depreciation

(Straight line method)

 Computation:
Cost
Less: Salvage Value
Depreciable Cost
Divided by: Estimated
no. of yrs Useful Life
Annual Depreciation

thods used Note: There are other methods used

ary depending also. Computation may vary depending
aight line on the given problem. Straight line
ethod used. method is the common method used.
erent account name

red or used)

e accounting period)

XX

s the expired or used portion

e accounting period)

XX
ed expense

nt on the adjusting journal

the unexpired portion or
f the prepayment)

ready received but not yet earned)

e accounting period)
 XX

tion of the amount initially received)

e accounting period)

XX
ome not yet earned

nt of Adjusting Journal Entry is the

on of the amount initially received).

used, but not yet paid)

e accounting period)

XX

penses for the month.

ed" e.g. Accrued Utilities Payable
be used. The account e.g. Utilities
the word "Accrued" is also

received)
e accounting period)

XX
XX

XX
XX

arned for the month but not yet received.

ed" e.g. Accrued Interest Receivable
be used. The account e.g. Interest
ut the word "Accrued" is also

e accounting period)

XX
Bad Debts Expens XX

and tear of property,

e accounting period)

XX
epreciation XX
 XX
XX
XX

no. of yrs
XX

other methods used

on may vary depending
blem. Straight line
mmon method used.
CLOSING ENTRIES

1. To close beginning inventory and nominal accounts with debit balances.

Periodic Method Perpetual Metho

Income Summary XX Income Summary

Merchandise Inventory, beg. XX Nominal accounts wi
Nominal accounts with debit balan XX such as sales returns
such as sales returns and allow.,sales discount, freight-out, depreciati
purchases, freight-in, freight-out, depreciation and expenses
(Note: Cost of sales is inc

2. To set up ending inventory and close nominal accounts with credit balances.
Periodic Method Perpetual Metho

Merchandise Inventory, End XX Nominal accounts with c

Nominal accounts with credit b XX such as sales and other in
such as sales, purchase returns and allow., Income Summary
purchase discount, other income

Income Summary XX
(Note: Merchandise inve

3. To close Income summary to capital (For Net Income) or

Periodic Method Perpetual Metho

Income Summary XX Income Summary

Owner's Capital XX Owner's Capital
 To close income summary to capital (For Net Loss)
Periodic Method Perpetual Metho
Owner's Capital XX Owner's Capital
Income Summary XX Income Summary

4. To close Drawing account to capital

Periodic Method Perpetual Metho

Owner's Capital XX Owner's Capital

Owner's Drawing XX Owner's Drawing
 Perpetual Method

Summary XX
minal accounts with debit balan XX
h as sales returns and allow.,sales discount,
ght-out, depreciation , expenses and cost of sales

Cost of sales is included under nominal accounts with debit balances)

balances.
Perpetual Method

al accounts with credit b XX

sales and other income
come Summary XX

Merchandise inventory, end is not included in the closing entry)

Perpetual Method

Summary XX
ner's Capital XX
Perpetual Method
s Capital XX
me Summary XX

Perpetual Method

s Capital XX
ner's Drawing XX
 Name of Company
Statement of Cash Flows
For Month/Year Ended December, 20____

Cash Flows from Operating Activities

Receipts
collections from Customers for the performance of services or Ᵽ
royalties, fees, commissions received
interest, dividends, and other income received
Payments
to suppliers for services and goods acquired
employees' salaries
government licenses and taxes
interest expense
other oeprating expenses
Net Cash from Operating Activities
Cash Flows from Investing Activities
Receipts
proceeds from sale of property and equipment, investment
in debt or trading securities, and collection of the principal
amount of the money loaned Ᵽ
Payments
for purchase of property and equipment
payment for investment in debt or trading securities,
Net cash from Investing Activities
Cash Flows from Financing Activities
Receipts
original and additional investments by owner Ᵽ
proceeds of loan
Payments
cash withdrawal of owner
 payment for the principal balance of loan
Net cash from Financing Activities
Net Increase/Decrease in Cash
Cash Balance - beg.
Cash Balance - end
mber, 20____

XXXX
XXXX
XXXX

(XXXX)
(XXXX)
(XXXX)
(XXXX)
(XXXX)
Ᵽ XXXX

XXXX

(XXXX)
XXXX

XXXX
XXXX

(XXXX)
(XXXX)
XXXX
Ᵽ XXXX
XXXX
Ᵽ XXXX
Account: _______________ Account No. ______
Date Explanation F Debit Date Explanation F Credit Balance

Account: _______________ Account No. ______

Date Explanation F Debit Date Explanation F Credit Balance
Problem:

Modem Corp. was incorporated on April 1, 2016 to operate a m

Journalize the transactions using periodic and perpetual invent
during April 2016 are as follows:

1 Ris Mendoza gave Ᵽ39,000 cash investment for his buisiness.

2 Paid Easton Furniture Ltd Ᵽ10,000 for equipment purchased.
2 Purchased Ᵽ15,900 merhandise on account from Blc Pens Ltd FO
2/10; n/30. Delivery charges, Ᵽ300 was paid by the buyer.
3 Purchased office supplies for amounting Ᵽ700.
4 Sold 15,200 of merchandise on account to Spellman Chair Renta
(Cost of Sales Ᵽ12,200)
5 Paid freight for April 4 Sales, Ᵽ200.
6 Received a memo from Blic Pen Ltd to reduce accounts by Ᵽ300
included in April 2.
11 Paid Blic Pen Ltd.
13 Received the amount due from Spellman Chair Rental for April 4
14 Purchased Ᵽ14,400 of merchandise.
15 Paid salaries of Ᵽ1,500.
16 Issued promissory note for Ᵽ200,000 cash received from bank b
17 Received refund of Ᵽ500 from purchased merchandise.
18 Purchased Ᵽ14,200 merchandise on account form from Shae Di
2/10; n/30.
20 Paid Ᵽ700 freight from May 18 purchase.
23 Sold Ᵽ16,400 merchandise (Cost of sale Ᵽ10,500)
26 Purchased Ᵽ12,300 of merchandise.
27 Paid Shaw Distributors Inc of Ᵽ9,000 on April 18 purchases. No
28 Mr. Ris took Ᵽ2,008 for personal use.
29 Paid return to customer from May 23 Sales, Ᵽ900. (cost 750)
30 Sold Ᵽ13,700 merchandise on account to Eagle Products Corp.,
30 Paid advertising Ᵽ1,000; Utilities Ᵽ400; Rent Ᵽ3,500; Salaries Ᵽ1

Required:
1 Prepare journal entries to record April transactions.
2 Post transactions.
3 Create Chart of Accounts up Until Post Closing Trial Balance.

Assume the Merchandise Inventory is counted at April 30 and a

 to operate a merchandising business.
rpetual inventory method. The transactions

s buisiness.
purchased.
Blc Pens Ltd FOB Shipping point, for term
he buyer.

an Chair Rental Inc. terms 2/10; n/30

ounts by Ᵽ300 for defective merchandise

ental for April 4 Sales.

d from bank borrowing.

m from Shae Distributors Inc. for terms

urchases. No discount on partial payment.

. (cost 750)
oducts Corp., FOB Destination, term 2/10; n/30. (cost 10,500)
00; Salaries Ᵽ1,500.

al Balance.

April 30 and assigned a total cost of Ᵽ25,000.