LESSON 6-3 THE T-ACCOUNT
Lesson Objective:
• Analyze transactions with the use of the debit and credit in T-accounts.
Cash Ong, Capital
5/2 300,000 5/2 300,000
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An overview of t-accounts and trial balances, essential tools in accounting. It explains how to analyze transactions using debits and credits in t-accounts, and how to prepare a trial balance to ensure the equality of debits and credits. Examples of journal entries, ledger accounts, and exercises to practice these concepts. It is designed to help students understand the fundamental principles of accounting and financial record-keeping, covering topics such as the accounting cycle, journalizing, posting, and the chart of accounts. The document also covers the normal balance of an account and how to determine debit and credit balances. It is a useful resource for high school students learning the basics of accounting.
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LESSON 6- 3 THE T-ACCOUNT
Lesson Objective:
- Analyze transactions with the use of the debit and credit in T-accounts.
Cash Ong, Capital
Cash Office Equipment 5/2 300,000 5/5 180,000 5/5 180, 5/3 100, May 5 Gisel Ong acquired furniture from Bloom’s costing P 40,000, paying P 12,000 and the remaining balance at the end of the month. (Note: A compound entry is needed in this transaction.) Rules Debit increases in assets. Credit decreases in assets. Credit increases in liabilities. Cash Office Furniture 5/2 300,000 5/5 180,000 5/5 4 0, 5/3 100,000 5/5 12, Accounts Payable 5/5 28,
May 12 Ms. Ong paid National Bookstore P 3,000 of the amount owed. Rules Debit decreases in liabilities, Credit decreases in assets.
May 20 Ms. Ong received P 80,000 cash for a contract to paint Lelouch. Rules Debit increases in assets. Credit increases in liabilities. Cash Unearned Painting Revenue
LESSON 6- 4 POSTING JOURNAL ENTRIES
IN THE LEDGER
Lesson Objectives:
- post the journal entries in the general ledger;
- familiarize oneself with the chart of accounts.
Anime World Gallery
Chart of Accounts
Balance Sheet Accounts
enue
General Ledger
Account: Cash Account No.: 110
Date Explanation J.R. Debit Credit Balance
May 2 Investment J- 1 300,000 300,
Account: Ong, Capital Account No.: 310
Date Explanation J.R. Debit Credit Balance
May 2 Investment J- 1 300,000 300,
The Ledger Accounts After Posting
The debit or credit of each account is determined at the end of the accounting period
in order to prepare the trial balance. The debit column and the credit column of each
account are added to get the balance each account. If an account’s total debit exceeds
total credit, then the account has a debit balance. On the other hand, if the account’s total
credit exceeds the total debits, then the account has a credit balance.
For illustration purposes, the ledger accounts of Anime World Gallery after posting,
are presented as follows:
Accounts Receivable Utilities Payable
Bal. 70,000 Bal. 4,
LESSON 6- 5 THE TRIAL BALANCE
Lesson Objectives:
- define a trial balance;
- prepare the trial balance and appreciate its use.
THE TRIAL BALANCE
The trial balance is the schedule of all balances to prove the equality of the debit and credit. It is a listing of all account titles with their respective debit or credit balances taken from the ledger. However, it does not check or vouch the accuracy of the report. The following are the steps in the preparation of the trial balance:
- In their proper numerical order, make a listing of all account titles.
- Get the account balance of each ledger account and write them under their corresponding debit or credit column.
- Foot or add the debit and the credit columns of the trial balance.
- Check whether the debit totals and credit totals are equal. They must be equal; otherwise, there is error in your trial balance.
Possible Errors in the Trial Balance
- Transposition – occurs when order of two numbers are reversed Example: 48 was erroneously written as 84 234 was erroneously written as 432
- Transplacement or Slide – occurs when a decimal point has been moved or misplaced Example: 100 was erroneously written as 10 67.89 was erroneously written as 678. Note: In both cases the discrepancy between the two columns of the trial balance is divisible by 9.
For illustration purposes, presented below is the trial balance of Anime World Gallery.
Anime World Gallery
- May 31, Trial Balance
- Cash P 373,
- Accounts Receivable 70,
- Art Supplies 7,
- Prepaid Rent 18,
- Office Equipmen 180,
- Furniture & Fixture 40,
- Accounts Payable P 32,
- Notes Payable 100,
- Utiities Payable 4,
- Unearned Painting Revenie 80,
- Ong, Capital 300,
- Ond, Drawing 18,
- Painting Revenue 210,
- Salaries Expense 4,
- Utilities Expense 5,
- Total P 726,700 P
POINTS TO REMEMBER ❖ In the double-entry system of recording transactions, a transaction must affect at least two accounts and total debits should equal total credits. ❖ Accounting Cycle — a standard sequence of uniform procedures repeated for each accounting period ❖ Steps in the Accounting Cycle
- Identifying and analyzing the events to be recorded
- Recording transactions in the journal (Journalizing)
- Posting journal entries to the ledger or T-Account
- Preparing the trial balance
- Preparing the worksheet and adjusting entries
- Preparing the financial statements
- Journalizing and posting of adjusting journal entries
- Journalizing and posting of closing journal entries
- Preparing the post-closing trial balance
- Journalizing and posting of reversing journal entries ❖ Journal — a chronological record of events or business transactions showing all the effects of each transaction in terms of debits and credits ❖ Journalizing — the process of recording transaction in the journal after it has been recognized and measured ❖ Account — a form of record that summarizes the increases or decreases of any specific accounting value ❖ Ledger — a group of the accounts used by the company. It is the book of final entry. ❖ Chart of Accounts — a list of all account titles used by the company with their corresponding account numbers ❖ Normal Balance of an Account — the side of an account where increases are recorded ❖ Posting — the process of transferring information from the journal to the ledger ❖ Trial balance — the schedule of all balances to prove the equality of the debit and credit
Let’s Have Exercises: Exercise 1
On May 15, 2016, Too Ly San opens Too Ly Security Service. Presented below are
the transactions for the month of May. Journalize the transactions and post then to
the T-accounts. Then, prepare a chart of accounts.
May 15 Mr. Too Ly San deposited P 8 00,000 of personal funds under the bank account of
Too Ly Security Service.
18 Paid 718,000 office rent for the month
21 Purchased office equipment P50,000 on account
25 Paid cash for transportation equipment P500,000 for use in the business
27 Paid P25,000 as partial payment for the office equipment.
31 Too Ly San withdrew P10,000 cash for personal use.
Exercise 2
Presented below are the transactions of The Skin Clinique owned by Dr. Sor Yasis.
Journalize the transactions and post them to the T-accounts. Then, prepare a chart
of accounts.
April 5 Dr. Sor Yasis invested P725,000 in the business.
7 Purchased equipment from Triple X Merchants; P95,000 on account.
14 Bought supplies for the shop; P16,000 on credit
16 Paid Triple X Merchants in full
20 Dr. Sor Yasis withdrew P125,000 for personal use.
27 Paid assistant's salary for the month, P25000.
29 Paid utilities for the month 76,
Exercise 5
Presented below are the transactions of Lagay Tax Services owned by Ms. Ligaya
Tek. Journalize the transactions and post them to the T-accounts. Prepare a trial
balance.
Sept. 1 Ms. Tek invested P125,000 in the business.
7 Purchased equipment from X Co.; P35,000 on account
9 Bought supplies for the office P1,000 on credit
16 Paid X Co. in full
20 Ms. Tek withdrew P5,000 cash for personal use.
27 Paid secretary's salary for the month, P8,
29 Paid utilities for the month, P2,
Exercise 6
Journalize the following transactions of Dr. Pim Paul Derma Clinic for the month of
February. Then, post the transactions to the T-Accounts. Prepare the trial balance.
Feb 1 Dr. Paul borrowed P420,000 from her father, issuing a personal promissory note.
She invested this money in the business.
2 Facial services rendered to Ms. Kapal Muks on account, P18,
5 Paid taxes and licenses, P2,500.
6 Medical services for cash from walk-in customers, P8,000.
9 Borrowed P200,000 from Mr. Ga Lee Sin, signing a non-interest bearing note
11 Bought medical equipment on credit from A Store, P22,000.
14 Dr. Paul made a personal withdrawal of P5,000.
18 Paid utilities, P3,
19 Collected account from Ms. Kapal Muks in full.
20 Sold to Skin Peel for cash the medical equipment bought from A Store, P22,
22 Full settlement of account with A Store
28 Dr. Paul invested a computer worth P75,000 with 20% unpaid balance to be
assumed by the business.
CHAPTER TEST