Weddings “R” Us

Transactions are Journalized (Step 2)

Initial Investment (Source of Assets)

May 1 Elisa Diaz is a social entrepreneur from the South. She is into a lot of interesting causes. Her fine
taste is preeminent such that she is considered an authority in planning weddings. Upon the advice and
prodding of an esteemed colleague, Maria Concepcion Manalo, Diaz decided to organize her wedding
consultancy. She invested P250,000 into this entity.

Analysis Assets increased. Owner's equity increased.

Rules Increases in assets are recorded by debits. Increases in owner's equity are recorded by credits.

Entry Increase in assets is recorded by a debit to cash: Increase in owner's equity is recorded by a credit
to Diaz, Capital.

Dr. Cr.

Cash (A) 250,000

Diaz, Capital (OE) 250,000

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Rent Paid in Advance (Exchange of Assets)

May 1 Rented office space and paid two months' rent in advance, P8,000.

Analysis Assets increased. Assets decreased.

Rules Increases in assets are recorded by debits. Decreases in assets are recorded by credits.

Entry Increase in assets is recorded by a debit to prepaid rent. Decrease in assets is recorded by a credit
to cash.

Dr. Cr.

Prepaid Rent (A) 8,000

Cash (A) 8,000

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Note Issued for Cash (Source of Assets)

May 2 Elisa Diaz issued a promissory note for a P210,000 loan from Metrobank. This availment will be
used for the acquisition of a service vehicle. The note carries a 20% interest per annum. The
arrangement with the bank is that both the interest and the principal are payable in full in one year.

Analysis Assets increased. Liabilities increased.

are recorded by credits.

Entry Increase in assets is recorded by a debit to cash. Increase in liabilities is recorded by a credit to
notes payable.

Dr. Cr.

Cash (A) 210,000

Notes Payable (L) 210,000

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May 2 Hired an office assistant and an account executive each with a P7,800 monthly salary. Or, each is
to receive P300 per day for the 26-day work month. No entry is necessary at this point. They started
work immediately.

Service Vehicle Acquired for Cash (Exchange of Assets)

May 4 Acquired service vehicle for P420,000.

Analysis Assets increased. Assets decreased.

Rules Increases in assets are recorded by debits. Decreases by credits.

Entry Increase in assets is recorded by a debit to service vehicle. Decrease in assets is recorded by a
credit to cash.

Dr. Cr.

Service Vehicle (A) 420,000

Cash (A) 420,000

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Insurance Premiums Paid (Exchange of Assets)

May 4 Paid Prudential Guarantee and Assurance, Inc. P14,400 for a one-year comprehensive insurance
coverage on the service vehicle.

Analysis An asset increased. Another asset decreased.

Rules Increases in assets are recorded by debits. Decreases in assets are recorded by credits.

Entry Increase in assets is recorded by a debit to prepaid insurance. Decrease in assets is recorded by a
credit to cash.
 Dr. Cr.

Prepaid Insurance (A) 14,400

Cash (A) 14,400

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Office Equipment Acquired on Account (Exchange and Source of Assets)

May 5 Acquired office equipment from Fair and Square Emporium for P60,000; paying P15,000 in cash
and the balance next month.

Note: A compound entry is needed for this transaction.

Analysis Assets increased. Assets decreased. Liabilities increased.

Rules Increases in assets are recorded by debits. Decreases in assets are recorded by credits. Increases
in liabilities are recorded by credits

Entry Increase in assets is recorded by a debit to office equipment. Decrease in assets is recorded by a
credit to cash. Increase in liabilities is recorded by a credit to accounts payable.

Dr. Cr.

Office Equipment (A) 60,000

Cash (A) 15,000

Accounts Payable (L) 45,000

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Supplies Purchased on Account (Source of Assets)

May 8 Purchased supplies on credit for P18,000 from San Jose Merchandising.

Analysis Assets increased. Liabilities increased

Rules Increases in assets are recorded by debits. Increases in liabilities are recorded by credits.

Entry Increase in assets is recorded by a debit to supplies. Increase in liabilities is recorded by a credit to
accounts payable.

Dr. Cr.

Supplies (A) 18,000

Accounts Payable (L) 18,000

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Accounts Payable Partially Settled (Use of Assets)

May 9 Paid San Jose Merchandising P10,000 of the amount owed.

Analysis Assets decreased. Liabilities decreased.

Rules Decreases in assets are recorded by credits. Decreases in liabilities are recorded by debits.

Entry Decrease in liabilities is recorded by a debit to accounts payable. Decrease in assets is recorded by
a credit to cash.

Dr. Cr.

Accounts Payable (L) 10,000

Cash (A) 10,000

Revenues Earned and Cash Collected (Source of Assets)

May 10 Coordinated and finalized simple bridal arrangements for three couples and collected fees of
P8,800 per couple. Services include prospecting and selecting the church and reception location,
couturier, caterer, car service, flowers, souvenirs and invitations.

Analysis Assets increased. Owner's equity increased.

Rules Increases in assets are recorded by debits. Increases in owner's equity are recorded by credits.

Entry Increase in assets is recorded by a debit to cash. Increase in owner's equity is recorded by a credit
to consulting revenues.

Dr. Cr.

Cash (A) 26.400

Consulting Revenues (OE:l) 26,400

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Salaries Paid (Use of Assets)

May 13 Paid salaries, P6,600. The entity pays salaries every two Saturdays (refer to the calendar in
Chapter 5).

Analysis Assets decreased. Owner's equity decreased.

Rules Decreases in assets are recorded by credits. Decreases in owner's equity are recorded by debits.

Entry Decrease in owner's equity is recorded by a debit to salaries expense. Decrease in assets is
recorded by a credit to cash.

Dr. Cr.

Salaries Expense (OE:E) 6.600

Cash (A) 6,600

Unearned Revenues Collected (Source of Assets)

May 15 The entity is earning additional revenues by referring consulting clients to friendly hotels,
caterers, printers, and couturiers. Received P10,000 advance fees for three clients referred.

Analysis Assets increased. Liabilities increased.

Rules Increases in assets are recorded by debits. Increases in liabilities are recorded by credits.

Entry Increase in assets is recorded by a debit to cash. Increase in liabilities is recorded by a credit to
unearned referral revenues.

Dr. Cr.

Cash (A) 10,000

Unearned Referral Revenues (L) 10,000

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Revenues Earned on Account (Source of Assets)

May 19 Coordinated and finalized elaborate bridal arrangements for three couples and billed fees of
P12,000 per couple. Additional services include documents preparation, consultation with a feng shui
expert as to the ideal wedding date for prosperity and harmony, provision for limousine service and
honeymoon trip.

Analysis Assets increased. Owner's equity increased.

Rules Increases in assets are recorded by debits. Increases in owner's equity are recorded by credits.

Entry Increase in assets is recorded by a debit to accounts receivable. Increase in owner's equity is
recorded by a credit to consulting revenues.

Dr. Cr.

Accounts Receivable (A) 36.000

Consulting Revenues (OE:)) 36,000

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Withdrawal of Cash by Owner (Use of Assets)

May 25 Diaz withdrew P14,000 for personal expenses.

Analysis Assets decreased. Owner's equity decreased.

Rules Decreases in assets are recorded by credits. Decreases in owner's equity are recorded by debits.

Entry Decrease in owner's equity is recorded by a debit to Diaz, Withdrawals. Decrease in assets is
recorded by a credit to cash
 Dr. Cr.

Diaz, Withdrawals (OE) 14,000

Cash (A) 14,000

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Salaries Paid (Use of Assets)

May 27 Paid salaries, P7,200.

Analysis Assets decreased. Owner's equity decreased.

Rules Decreases in assets are recorded by credits. Decreases in owner's equity are recorded by debits.

Entry Decrease in owner's equity is recorded by a debit to salaries expense. Decrease in assets is
recorded by a credit to cash.

Dr. Cr.

Salaries Expense (OE:E) 7,200

Cash (A) 7.200

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Expenses Incurred but Unpaid (Exchange of Claims)

May 30 Received the ICC-BayanTel telephone bill, P1,400.

Analysis Liabilities increased. Owner's equity decreased.

Rules Increases in liabilities are recorded by credits. Decreases in owner's equity are recorded by debits.

Entry Decrease in owner's equity is recorded by a debit to utilities expense. Increase in liabilities is
recorded by a credit to utilities payable.

Dr. Cr.

Utilities Expense (OE:E) 1,400

Utilities Payable (L) 1,400

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Accounts Receivable Partially Collected (Exchange of Assets)

May 30 Received P24,000 from two clients for services billed last May 19.

Analysis An asset increased. Another asset decreased.

Rules Increases in assets are recorded by debits. Decreases as credits

Dr. Cr

Cash (A) 24,000

Accounts Receivable (A) 24,000

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Expenses Incurred and Paid (Use of Assets)

May 31 Settled the electricity bill of P3,000 for the month.

Analysis Assets decreased. Owner's equity decreased.

Rules Decreases in assets are recorded by credits. Decreases in owner's equity are recorded by debits.

Entry Decrease in owner's equity is recorded by a debit to utilities expense. Decrease in assets is
recorded by a credit to cash.

Dr. Cr.

Utilities Expense (OE:E) 3,000

Cash (A) 3,000

Posting (Step 3)
Trial Balance (Step 4)