Business

Finance
•Financial statements tell us
the financial progress made by
the business. It can highlight
financial strengths and surface
financial weaknesses.
 Accounting Cycle Steps
• Ordinary and common-sized businesses usually have
an accounting cycle of one year and they follow the
calendar year.

• Accounting cycle is a series of recurring accounting

steps or processes that span from the start to the end
of a particular accounting period.
• Accounting cycle is composed of the
following steps:
• Analyzing business transactions from source
documents.
• Journalizing the business transactions
• Posting journal entries transactions
• Preparing adjusted trial balance
• Preparing financial statements
• Journalizing and posting closing journal entries
• Preparing post-closing trial balance
• Journalizing and posting reversing journal entries
 Transactions in a service business

• 10-step accounting cycle using the

transactions of Jordan River Laundry, a sole
proprietorship service business, which started
on September 2, 2015. The initial investment
of Mr. Jordan were:
Transactions in a service business
Cash P 120, 000
Laundry 35,000
Equipment
Furniture and 22,500
Fixtures
Office Supplies 4,200
Laundry Supplies 5,000
 During the month of September, the
following additional transactions occurred:
Sep 8
bought dyers and spinners from Mirzi Outlet for
P40,000. Jordan paid 30% down payment and the balance
on account.

Sep 10
laundry services rendered totaled P195,000, of which
40% on account.
Sep 12
Receive proceeds of P220,000 from a bank loan for
business use. Jordan would use this to purchase a van for
pick-up and delivery laundry from and to clients.

Sep 14
purchased a delivery van from Renzo Motors for
P250,000. Jordan used the entire proceeds from the bank loan
to pay for the delivery van and the balance on account.

Sep 15
paid various operating expenses during the month: water
and electricity. P28,000; telephone expense, P6,ooo; and
repairs expense, P3,500.
Sep 18
laundry services rendered totaled P180,00, of which
30% was settled with a note and the balance on account.

Sep 20
received laundry advances from Madeleine Hotel for
services to be rendered next month, P90,000

Sep 22
collected 90% of the outstanding receivable from Sep 10
transactions
Sep 26
purchased detergents and fabric softeners from Ivana
Cleaning Scents, P12,000. Paid P8,000 cash and the balance on
account.

Sep 28
returned P2,000 worth of damaged detergents and fabric
conditioners bought last Sep 26

Sep 29
Mr. Jordan withdrew P3000 for personal use

Sep 30
paid wages of two staff, P10000 each.
 STEP 1
Recall the transaction analysis
NORMAL BALANCE INCREASE DECREASE
THROUGH THROUGH
ASSETS DEBIT DEBIT CREDIT
LIABILITIES CREDIT CREDIT DEBIT
OWNER’S EQUITY
- OWNER, CAPITAL CREDIT CREDIT DEBIT
- OWNER, DEBIT DEBIT CREDIT
DRAWING
REVENUES CREDIT CREDIT DEBIT
EXPENSES DEBIT DEBIT CREDIT
CONTRA-VALUATION ACCOUNTS:
- ALLOWANCE FOR CREDIT CREDIT DEBIT
OUBTFUL
ACCOUNTS
- ACCUMULATED CREDIT CREDIT DEBIT
DEPRECIATION
 STEP 2
Journalizing business transaction
 STEP 3
Posting to the ledger
 STEP 4
Preparing for the trial balance
 STEP 5
Journalizing and posting adjusting journal
entries
 STEP 6
Preparing the adjusted trial balance
 STEP 7
preparing the financial statements
 STEP 8
Journalizing and posting closing entries
 STEP 9
Preparing post-closing trial balance
 STEP 10
Journalizing and posting reversing journal
entries
 JOURNALIZING, POSTING, AND
PREPARING TRIAL BALANCE
• Arnina established a service business to be known
as Arnina Photography on July 1, 2015. During the
first month, the following transactions occurred:
• July 1: Arnina transferred cash of P300,000 from her
personal bank account to be used for her business.
She also invested the following: digital camera,
P45,000; manual camera, P25,000; desktop
computer, P28,000; photo papers and ink, P14,000;
and personal debts evidenced by a note which
would be assumed by the business, P12,000.
• July
4: paid 6-month advance rent to Cyrene
Commercial Complex, P30,000
• July
6: Received a statement of account from
Brian News for advertising this month, P5,500.
• July8: Bought photo enhancing and editing
equipment from Mirzi Outlet for P40,000.
Arnina paid 30% down payment and the
balance on account.
• July12: hired office assistant with a monthly
salary of P6,000. The office assistant started
on July 16, 2014
• July13: Photography services rendered totaled
P180,000. Terms: 25% cash and the balance
settled on the account.
• July
14: Purchased office sofa set from Renzo
Designs for P30,000 on account.
• July 15: paid various operating expenses during
the month: meeting potential clients, P4,000;
electricity, P23,000; telephone expenses,
P6,000; and repairs expense, P2,500.
• July18: photography services rendered totaled
P180,000, of which 25% was settled with an
interest-bearing note and the balance on
account.
• July
20: received photography advances from
a couple for a prenuptial coverage to be
rendered next month, P60,000.
• July22: collected 90% of the outstanding
receivable from July 31 transaction.
• July
24: paid in full the statement of account
receivable from July 13 transactions
• July 26: Paid 80% of the 0utstanding
obligation to Mirzi Outlet and for the
remaining balance, she issued an interest-
bearing note.
• July 28: paid half of the outstanding obligation
to Renzo Designs
• July
31: paid salary of the office assistant for
16 days, P3,097.

• Required:
• Journalize the foregoing transactions.
• Post the transactions
• Prepare trial balance
On the space provided, write TRUE if the idea being
expressed is correct and FALSE if otherwise.
_____1. Knowledge of accounting is important in studying
finance.
_____2. Accounting is the study of how players in a
financial system acquire, spend, manage, and make other
sound financial decisions concerning money and other
financial resources.
_____3. Financial statements tells us the financial progress
made by the business.
_____4. Post closing trial balance is a series of recurring
accounting steps or processes that span from the start to
the end of a particular accounting period.
_____5. Journalizing and posting must be done in a journal.
_____6. Accounting cycle has 10 steps.
_____7. The journal entries responsible for
closing nominal accounts and drawing account
to zero balances are called closing entries.
_____8. The first step in accounting cycle is
journalizing.
_____9. A balanced trial balanced guarantees
accuracy in posting.
_____10. In journalizing, total debits may not
equal to total credits.
On the space provided, write TRUE if the idea being
expressed is correct and FALSE if otherwise.
1. TRUE
2. FALSE, FINANCE
3. TRUE
4. FALSE, ACCOUNTING CYCLE
5. FALSE, POSTING IS BEING DONE IN LEDGER
6. TRUE
7. TRUE
8. FALSE, ANALYZING THE BUSINESS TRANSACTIONS FROM
SOURCE DOCUMENTS
9. TRUE
10.FALSE