YOUR TURN

Activity 10: We all know that the purpose of accounting is to provide quantitative information
of the business entity. In gathering this information accounting process follows a sequential
procedures in accumulating this information. The first step of the accounting process is the
preparation of journal entries. Your previous knowledge in account classification, identifying
normal balance, type of transaction and the effect of this transaction to the accounting
equation is very important. In this activity you are going prepare journal entries using the chart
of accounts (that you will also provide), post these journal entries to the General Ledger and
extract the balances from each general ledger.

April Anne Mangubat July 1, 2020 – Deposited the amount of P50,000 from her
established an Organic savings to her business bank account.
Gardening Planters, by July 2, 2020 - She rented an office space at P1,000 per month
providing gardening and paid 3 months rent in advance.
services to the people July 3, 2020 – Paid business permit and other taxes amounting
during the quarantine to P4,200.
period. This is the July 4, 2020 – She bought gardening supplies on credit from a
business that she decided hardware P5,500.
to open which is very July 5, 2020- Bought for cash various seeds for plantingP500.
timely during this covid July 7, 2020 – Billed customers for services rendered to various
crisis. During the first customers P 10,500.
month of operations the July 10, 2020- Make partial payment for the account on July 4
following transactions has P3,000.
occurred. July 13, 2020- Received cash from customer for the services
rendered P8,000.
July 14, 2020- Collected cash from July 7, account P9,000.
July 15, 2020- Paid the services of the gardeners for the 1st half of the month P3,500.
July 20, 2020- Received cash from customer for the services to be rendered in the future P6,000.
July 23, 2020- Paid the electric and water consumption of the office P2,200.
July 27, 2020- Paid charges for advertising the company P800.
July 31, 2020- Paid the services of the gardeners for the 2nd half of the month P3,500.
July 31, 2020- The owner withdrew cash for personal use P3,500.

REQUIRED:
Prepare journal entries
with brief explanation
after each entry, post the
entries to general ledger
and prepare a trial
balance. You have to
develop your own chart of
accounts for this type of
business.
 JOURNAL ENTRIES

Illustrative Problem:
Organic Gardening Planters
(Complete Accounting Process for Service Concern)

Investment by Owner

July 1 - Deposited the amount of P50,000 from her savings to her business bank account.
(At this point, an entity, Organic Gardening Planters was created separate and distinct from
the owner, Ms. Mangubat)

Analysis : There is an increase in Asset- Cash in Bank of P50,000 and a corresponding

increase in Owner’s Equity, Mangubat, Capital of P50,000.

Rule : Debit, increase in Asset and Credit, increase in Owner’s Equity.

Journal Entry
2020
July 1
Cash in Bank P50,000
Mangubat, Capital P50,000
Initial Investment

Advance Payment

July 2 - She rented an office space at P1,000 per month and paid 3 months rent in
advance.

Analysis : There is an increase in Asset- Prepaid Rental of P3,000 and a corresponding

decrease in Asset- Cash in Bank of P3,000.

Rule : Debit, increase in Asset and Credit, decrease in Asset.

Journal Entry
2020
July 2
Prepaid Rental P3,000
Cash in Bank P3,000
Advance payment of rent
Payment of Taxes, Licenses and Other Government Dues

July 3 - Paid business permit and other taxes amounting to P4,200.

Analysis : There is a decrease in Owner’s Equity (increase in expense) of P4,200 and a

decrease in Asset- Cash in Bank of P4,200.

Rule : Debit, increase in Expense and Credit, decrease in Asset.

Journal Entry
2020
July 3
Taxes and Licenses P4,200
Cash in Bank P4,200
Payment of business permits and other taxes

Purchase of Supplies on Credit

July 4 - She bought gardening supplies on credit from a hardware P5,500.

Analysis : There is an increase in Asset- Gardening Supplies Inventory of P5,500

and a corresponding increase in Liability- Accounts Payable of P5,500.

Rule : Debit, increase in Asset and Credit, increase in Liability.

Journal Entry
2020
July 4
Gardening Supplies P5,500
Accounts Payable P5,500
Gardening supplies on credit

Purchase of Supplies in Cash

July 5 - Bought for cash various seeds for plantingP500.

Analysis : There is an increase in Asset- Gardening Supplies of P500 and a corresponding

decrease in Asset- Cash in Bank of P500.

Rule : Debit, increase in Asset and Credit, decrease in Asset.

 Journal Entry
2020
July 5
Gardening Supplies P500
Cash in Bank P500
Bought seeds for planting

Services Rendered for Credit

July 7 - Billed customers for services rendered to various customers P 10,500.

Analysis : There is an increase in Asset- Accounts Receivable of P10,500 and a

corresponding increase in Owner’s Equity- Mangubat, Capital (increase in
Income) of P10,500.

Rule : Debit, increase in Asset and Credit, increase in Owner’s Equity.

Journal Entry
2020
July 7
Accounts Receivable P10,500
Gardening Income P10,500
Services on credit

Partial Payments of Accounts Payable

July 10 - Make partial payment for the account on July 4 P3,000.

Analysis : There is a decrease in Liability- Accounts Payable of P3,000 and a

corresponding decrease in Asset- Cash in Bank of P3,000.

Rule : Debit, decrease in Liability and Credit, decrease in Asset.

Journal Entry
2020
July 10
Accounts Payable P3,000
Cash in Bank P3,000
Partial payment of account
Collection of Accounts Receivable

July 13 - Received cash from customer for the services rendered P8,000.

Analysis : There is an increase in one form of Asset- Cash in Bank of P8,000 and a
corresponding decrease in another form of an Asset- Accounts Receivable of
P8,000.

Rule : Debit, increase in Asset and Credit, decrease in Asset.

Journal Entry
2020
July 13
Cash in Bank P8,000
Accounts Receivable P8,000
Collection of payment for services rendered

Partial Collection of Accounts Receivable

July 14 - Collected cash from July 7, account P9,000.

Analysis : There is an increase in one form of Asset- Cash in Bank of P9,000 and a
corresponding decrease in another form of an Asset- Accounts Receivable of
P9,000.

Rule : Debit, increase in Asset and Credit, decrease in Asset.

Journal Entry
2020
July 14
Cash in Bank P9,000
Accounts Receivable P9,000
Partial collection of accounts

Payment of Expenses

July 15 - Paid the services of the gardeners for the 1st half of the month P3,500.

Analysis : There is a decrease in Owner’s Equity- Mangubat, Capital of P3,500 (increase in

In Expense) and a corresponding decrease in Asset- Cash in Bank of P3,500.

Rule : Debit, decrease in Owner’s Equity and Credit, decrease in Asset.

 Journal Entry
2020
July 15
Salaries Expense P3,500
Cash in Bank P3,500
Payment of salaries

Collection of Income in Advance but not yet Rendered

July 20 - Received cash from customer for the services to be rendered in the future P6,000.

Analysis : There is a decrease in Liability- Unearned Gardening Income of P6,000 and

a corresponding increase in Owner’s Equity- Mangubat, Capital (increase in
Income) Of P6,000.

Rule : Debit, decrease in Liability and Credit, increase in Owner’s Equity.

Journal Entry
2020
July 20
Unearned Gardening Income P6,000
Gardening Income P6,000
To record earned portion of income collected in advance

Payment of Expenses

July 23 - Paid the electric and water consumption of the office P2,200.

Analysis : There is a decrease in Owner’s Equity- Mangubat, Capital of P2,200 (increase in

In Expense) and a corresponding decrease in Asset- Cash in Bank of P2,200.

Rule : Debit, decrease in Owner’s Equity and Credit, decrease in Asset.

Journal Entry
2020
July 23
Utilities Expense P2,200
Cash in Bank P2,200
Payment of utilities
Payment of Expenses

July 27 - Paid charges for advertising the company P800.

Analysis : There is a decrease in Owner’s Equity- Mangubat, Capital of P800 (increase in

In Expense) and a corresponding decrease in Asset- Cash in Bank of P800.

Rule : Debit, decrease in Owner’s Equity and Credit, decrease in Asset.

Journal Entry
2020
July 27
Advertising Expense P800
Cash in Bank P800
Payment of advertisement

Payment of Expenses

July 31 - Paid the services of the gardeners for the 2nd half of the month P3,500.

Analysis : There is a decrease in Owner’s Equity- Mangubat, Capital of P3,500 (increase in

In Expense) and a corresponding decrease in Asset- Cash in Bank of P3,500.

Rule : Debit, decrease in Owner’s Equity and Credit, decrease in Asset.

Journal Entry
2020
July 31
Salaries Expense P3,500
Cash in Bank P3,500
Payment of salaries

Withdrawal of Owner

July 31 - The owner withdrew cash for personal use P3,500.

Analysis : There is a decrease in Owner’s Equity- Mangubat, Capital (increase in

drawing) of P3,500 and a corresponding decrease in Asset- Cash in Bank of
P3,500.

Rule : Debit, increase in Drawing and Credit, decrease in Asset.

 Journal Entry
2020
July 31
A. Mangubat, Drawing P3,500
Cash in Bank P3,500
Withdrawal of owner
 GENERAL JOURNAL

2020 Particulars Folio Debit Credit

Jul 1 Cash in Bank GL-1 50,000
y
Mangubat, Capital GL-7 50,000
Initial Investment

2 Prepaid Rental GL-4 3,000

Cash in Bank GL-1 3,000
Advance payment of rent

3 Taxes and Licenses GL-13 4,200

Cash in Bank GL-1 4,200
Payment of business permits and
other taxes

4 Gardening Supplies GL-3 5,500

Accounts Payable GL-5 5,500
Gardening supplies on credit

5 Gardening Supplies GL-3 500

Cash in Bank GL-1 500
Bought seeds for planting

7 Accounts Receivable GL-2 10,500

Gardening Income GL-9 10,500
Services on credit

1 Accounts Payable GL-5 3,000

0
Cash in Bank GL-1 3,000
Partial payment of accounts

1 Cash in Bank GL-1 8,000

3
Accounts Receivable GL-2 8,000
Collection of payment for services
rendered

1 Cash in Bank GL-1 9,000

4
Accounts Receivable GL-2 9,000
 Partial collection of accounts

1 Salaries Expense GL-10 3,500

5
Cash in Bank GL-1 3,500
Payment of salaries

2 Gardening Income GL-9 6,000

0
Unearned Gardening Income 6,000
To record earned portion of
income
collected in advance
GL-12
2 Utilities Expense GL-1 2,200
3
Cash in Bank 2,200
Payment of utilities

2 Advertising Expense GL-11 800

7
Cash in Bank GL-1 800
Payment of advertisement

3 Salaries Expense GL-10 3,500

1
Cash in Bank GL-1 3,500
Payment of salaries

3 A. Mangubat, Drawing GL-8 3,500

1
Cash in Bank GL-1 3,500
Withdrawal of owner
 GENERAL LEDGER

ASSETS

Account No. 1
2020 Particulars F Debit 2020 Particulars F Credit
July 1 Investment JE-1 50,000 July 2 Prepaid Rental JE-1 3,000
1 Collection of JE-1 8,000 3 Taxes and JE-1 4,200
3 Payment Licenses
1 Partial Collection JE-2 9,000 5 Gardening JE-1 500
4 Supplies
1 Partial Payment JE-1 3,000
0
1 Salaries Expense JE-2 3,500
5
2 Utilities Expense JE-2 2,200
3
2 Advertising JE-2 800
7 Expense
3 Salaries Expense JE-2 3,500
1
3 Withdrawal JE-2 3,500
1
42,800 67,000 24,200

Accounts Receivable Account No. 2

2020 Particulars F Debit 2020 Particulars F Credit
Jul 7 JE-1 10,500 Jul 13 JE-1 8,000
y y
14 JE-2 9,000
10,500 6,500 17,000
 Gardening Supplies Inventory Account No. 3
2020 Particulars F Debit 2020 Particulars F Credit
Jul 4 JE-1 5,500 Jul
y y
5 JE-1 500
6,000

Prepayments Account No. 4

2020 Particulars F Debit 2020 Particulars F Credit
Jul 2 JE-1 3,000 July
y
 LIABILITIES

Accounts Payable Account No. 5

2020 Particulars F Debit 2020 Particulars F Credit
July 1 JE-1 3,000 July 4 JE-1 5,500
0

2,500

Unearned Income Account No. 6

2020 Particulars F Debit 2020 Particulars F Credit
July 2 JE-2 6,000 Jul
0 y

Owner’s Equity

A. Mangubat, Capital Account No. 7

2020 Particulars F Debit 2020 Particulars F Credit
Jul Jul 1 JE-1 50,000
y y

A. Mangubat, Drawing Account No. 8

2020 Particulars F Debit 2020 Particulars F Credit
Jul 3 JE-2 3,500 July
y 1

Income

Gardening Income Account No. 9

2020 Particulars F Debit 2020 Particulars F Credit
July July 7 JE-1 10,500
2 JE-2 6,000
0
16,500
 Expenses

Salaries Expense Account No. 10

2020 Particulars F Debit 2020 Particulars F Credit
July 15 JE-2 3,500 Jul
y
31 JE-2 3,500
7,000

Advertising Expense Account No. 11

2020 Particulars F Debit 2020 Particulars F Credit
July 2 JE-2 800 July
7

Utilities Expense Account No. 12

2020 Particulars F Debit 2020 Particulars F Credit
July 23 JE-2 2,200 Jul
y

Taxes and Licenses Account No. 13

2020 Particulars F Debit 2020 Particulars F Credit
July 3 JE-1 4,200 July
 OPEN BALANCES

Debit Credit
Balance Balance

Cash in Bank P 42,800

Accounts Receivable P 6,500
Gardening Supplies Invty. 6,000
Prepaid Rental 3,000
Accounts Payable 2,500
Unearned Gardening Income 6,000
Mangubat, Capital 50,000
A. Mangubat, Drawing 3,500
Gardening Income 16,500
Salaries Expense 7,000
Advertising Expense 800
Utilities Expense 2,200
Taxes and Licenses 4,200

Organic Gardening Planters

Trial Balance
31 July 2020
Account Titles F Debit Credit
Cash in Bank 1 P 42,800
Accounts Receivable 2 P 6,500
Gardening Supplies Invty. 3 6,000
Prepaid Rental 4 3,000
Accounts Payable 5 2,500
Unearned Gardening Income 6 6,000
Mangubat, Capital 7 50,000
A. Mangubat, Drawing 8 3,500
Gardening Income 9 16,500
Salaries Expense 10 7,000
Advertising Expense 11 800
Utilities Expense 12 2,200
Taxes and Licenses 13 4,200
Total P 75,500 P 75,500
 ORGANIC GARDENING PLANTERS
Chart of Accounts

Balance Sheet Accounts Income Statement Accounts

Assets Income

Page Account Page Account

No. No. No. No.

1 111 Cash in Bank 9 441 Gardening Income

2 112 Accounts Receivable
3 113 Gardening Supplies Invty.
4 114 Prepaid Rental

Liabilities Expenses

5 221 Accounts Payable 10 551 Salaries Expense

6 222 Unearned Gardening Income 11 552 Advertising Expense
12 553 Utilities Expense
13 554 Taxes and Licenses
Owner’s Equity

7 331 Mangubat, Capital

8 332 A. Mangubat, Drawing