Fundamentals of Accounting

Initial Investment
May 2 Gisel Ong loves to watch anime. She draws posters of colorful anime characters. Sometimes she displays them in her office. To her surprise, many anime fans
buy her drawings and paintings and place special orders for the anime characters of their choice. Thus, Gisel decided to open Anime World Gallery. Gisel
invested ₱ 300,000.00 in this initial endeavor.
Analysis: Assets increased. Owner’s equity increased.
Rules: Debit increases in assets. Credit increases in owner’s equity.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.
May 2 Cash 300,000.00
Ong, Capital 300,000.00
Initial Investment

Issuance of Note for Cash

May 3 Gisel Ong issued a promissory note for a ₱100,000.00 loan from Allay Bank. The note carries a 12% interest per annum. The interest and the principal are
payable after one year.
Analysis: Assets increased. Liabilities increased.
Rules: Debit increases in assets. Credit increases in liabilities.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.
May 3 Cash 100,000.00
Notes Payable 100,000.00
Borrowed money from the bank by issuing a promissory note

Acquisition of Office Equipment for Cash

May 5 Ms. Ong acquired office equipment to be used for the office paying ₱180,000.00 in cash.
Analysis: An asset increased. Another asset decreased.
Rules: Debit increases in assets. Credit decreases in assets.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.
May 5 Office Equipment 180,000.00
Cash 180,000.00
Purchased office equipment for cash

Acquisition of Furniture Paying Down Payment and the Balance on Account

May 5 Ms. Ong acquired furniture from Bloom’s costing ₱40,000.00, paying ₱12,000.00 and the balance at the end of the month.
Analysis: Assets increased. Assets decreased. Liabilities increased.
Rules: Debit increases in assets. Credit decreases in assets. Credit increases in liabilities.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.

May 5 Furniture and Fixture 40,000.00

Cash 12,000.00
Accounts Payable 28,000.00
Bought furniture by paying cash and the balance on account

Advance Payment of Rental

May 6 Gisel Ong rented office space and paid two months rent in advance, all costing ₱18,000.00
Analysis: An asset increased. Another asset decreased.
Rules: Debit increases in assets. Credit decreases in assets.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.
May 6 Prepaid Rent 18,000.00
Cash 18,000.00
Paid two months rent in advance

Payment of Insurance Premiums

May 7 Ms. Ong paid Asia Insurance Co. ₱10,800.00 for one year insurance of the gallery.
Analysis: An asset increased. Another asset decreased.
Rules: Debit increases in assets. Credit decreases in assets.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.
May 7 Prepaid Insurance 10,800.00
Cash 10,800.00
Paid one year insurance premium

Events not Affecting the Accounting Equation (no journal entry)

May 7 Hired a part-time student helper with ₱4,000.00 monthly salary. The student helper started working on the following day.
Analysis: There is no entry necessary at this point as the hiring of the student helper has no effect on the assets, liabilities, and owner’s equity.
May 8 Called National Book Store and ordered art supplies worth ₱7,200.00
Analysis: There is no entry necessary at this point as the ordering of the art supplies has no effect on the assets, liabilities, and owner’s equity. No delivery of the
supplies has been made, thereby no liability arises.

Purchase of Art Supplies on Account

May 8 The ₱7,200.00 worth of art supplies ordered from National Book Store were delivered on account.

Analysis: Assets increased. Liabilities increased.

Rules: Debit increases in assets. Credit increases in liabilities.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.
May 8 Art Supplies 7,200.00
Accounts Payable 7,200.00
Paid two months rent in advance

Income Earned on Account

May 11 An oil painting of Naruto and an acrylic painting of L was delivered to Mr. Reyes. Gisel Ong billed Mr. Reyes ₱120,000.00 for the paintings delivered.

Analysis: Assets increased. Income increased.

Rules: Debit increases in assets. Credit increases in owner’s equity.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.
May 11 Accounts Receivable 120,000.00
Painting Revenue 120,000.00

Partial Settlement of Accounts Payable

May 12 Ms. Ong paid National Book Store ₱3,000.00 of the amount owed.

Analysis: Assets decreased. Liabilities decreased.

Rules: Debit decreases in liabilities. Credit decreases in assets.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.
May 12 Accounts Payable 3,000.00
Cash 3,000.00
Made partial payment to National Book Store

Partial Collection of Accounts Receivable

May 15 Ms. Ong received ₱50,000.00 from Mr. Reyes as partial payment for the anime painting delivered last May 11.

Analysis: An asset increased. Another asset decreased.

Rules: Debit increases in assets. Credit decreases in assets.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.
May 15 Cash 50,000.00
Accounts Receivable 50,000.00
Received cash as partial collection from Mr. Reyes

Cash Withdrawal by Owner for Personal use

May 18 Gisel Ong withdrew ₱18,000.00 for personal use.
Analysis: Assets decreased. Owner’s equity decreased.
Rules: Debit decreases in owner’s equity. Credit decreases in assets.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.
May 15 Ong, Drawing 18,000.00
Cash 18,000.00
Withdrew cash for personal use

Collection of Unearned Income

May 20 Ms. Ong received ₱80,000.00 cash for a contract to paint Lelouch.
Analysis: Assets increased. Liabilities increased.
Rules: Debit increases in assets. Credit increases in liabilities.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.
May 20 Cash 80,000.00
Unearned Painting Revenue 80,000.00
Received cash for painting services to be rendered

Cash Collection from Income Earned

May 23 Gisel Ong received cash from Ms. Dela Cruz, ₱90,000.00, for a charcoal poster of Kirito.
Analysis: Assets increased. Income increased.
Rules: Debt increases in assets. Credit increases in owner’s equity.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.
May 23 Cash 90,000.00
Painting Revenue 90,000.00
Received cash for a charcoal painting

Payment of Salaries
May 25 Ms. Ong paid helper’s salary for the month, ₱4,000.00
Analysis: Assets decreased. Expense decreased.
Rules: Debit decreases in owner’s equity. Credit decreases in assets.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.
May 25 Salaries Expenses 4,000.00
Cash 4,000.00
Paid helper’s salary for the month
Payment of Expenses Incurred/Consumed
May 29 Gisel Ong paid water bill of ₱540 for the month.
Analysis: Assets decreased. Owner’s equity decreased.
Rules: Debit decreases in owner’s equity. Credit decreases in assets.
Entry:
Date Accounts Title and Explanation P.R. Dr. Cr.
May 29 Utilities Expenses 540.00
Cash 540.00
Paid water bill for the month

Unpaid Expenses already Consumed/ Incurred (Accrued Expenses)

May 30 Ms. Ong received bill from Meralco amounting to ₱4,500.00
Analysis: Expenses increased. Liability increased.
Rules: Debit increase in expenses. Credit increases in liabilities.
Entry:

Date Accounts Title and Explanation P.R. Dr. Cr.

May 30 Utilities Expenses 4,500.00
Utilities Payable 4,500.00
Paid water bill from Meralco