The Chart of Accounts

The specific account titles and codes to use in recording transactions are maintained in
a Chart of Accounts. It is a list of the account codes and titles that are used in recording
entries in the Journal. It shall be maintained and updated for necessary changes, like
additions of new accounts, change of titles and codes and removal of accounts that will
no longer be used.

The accounts are normally listed in the order in which they appear in the financial
statements. An account code identifies the account which will serve as its cross-
reference in the journal and ledger.

A sample is as follows:

Identifying Accountable Transactions

 Business transactions or events are analyzed whether they are accountable or not. Only
transactions which are identified to be accountable transactions are recorded in the
accounting records. A transaction or event is accountable when it meets the following
criteria:

1. It involves the business entity.

 2. It can be measured in terms of money.
3. It occurred on a specific date or for a specific period.
4. It affects the assets, liabilities or equity of the business.
5. It is supported by a document.

Examples of accountable transactions:

Mr. Luca Pacioli established Pacioli General Services and had the following transactions
for the month of January:

Jan 2 Investment of P100,000 capital funds by Mr. Pacioli into the business
Receipt of a Charge Invoice from a supplier for the purchase of a desktop computer
Jan 7
amounting to P30,000.
Jan 9 Purchase of supplies amounting to P8,000 in cash.
Jan Issuance of a Service Invoice for an amount of P40,000 to a customer for services
15  rendered on account.
Jan
Receipt of P28,000 cash from customers in payment of their account.
17
Jan Payment in cash and receipt of an official receipt from supplier for payment of accounts,
22 P22,000.
Jan
Cash payment of P12,000 for the salary of an employee.
31 
Jan
Mr. Pacioli withdrew P10,000 cash from the business.
31 

Examples of non-accountable transactions:

 The owner of the business spent P80,000 for his wedding.

 The owner spent transportation and representation expenses amounting to
P5,000.
 A secretary was hired for P15,000 monthly salary.
 The company received from a customer a sales order amounting to P100,000
worth of goods.
 The company issued to a supplier a purchase order amounting to P200,000 worth
of inventory.
 The company entered into a contract to provide services for the next 5 years, at
an amount of P500,000 per year.
 The company has been using the electricity for the first month of its operations
but has not yet received the electric bill.fIt can be measured in terms of money
  The company has been recognized by the local government unit as the best
service provider in the locality. It is foreseen to grow into a P10 million company
in the next few years.

Business Documents
The business documents forms serve as evidence to support the accountable
transactions or events. These documents provide the data concerning the parties
involved, the exchange made, the date and the money value of the exchange made.
Some of the common business documents include the following:

1. Sales Invoice – document issued to customer for specific materials or supplies

furnished or services rendered. It is called Purchase Invoice from the point of view
of the customer.
2. Delivery Receipt – document signifying delivery of goods and receipt of
inventory.
3. Official Receipt – document issued to acknowledge receipt of cash.
4. Deposit Slip – document used to deposit cash and cheques to a bank.
5. Purchase Invoice – a bill from a vendor for specific materials or supplies
furnished or services rendered. It is called Sales Invoice from the point of view of
the supplier.
6. Disbursement Voucher – a written, approved record of payment of cash.
7. Withdrawal Slip – document used to withdraw cash from a bank.
8. Cheque Issuance Record – a record of cheques issued by the company.
9. Promissory Notes – a written promise to pay a certain sum of money to the
payee. It may sometimes bear an interest over a period of time.
10. Bank Statement – a document listing the bank transactions of the depositor.
11. Billing Statement or Statement of Account – document listing the unpaid
invoices of a customer. Oftentimes, it lists chronologically the invoices, payments
and adjustments to the account of the company.
12. Business Letters – correspondences to other companies, organizations or
government entities which may serve as a basis in recording an accountable
transaction or event.

Recording Transactions in the General Journal

Recording Transactions in the General Journal
Business transactions are chronologically recorded in the General Journal. The
transactions are recorded through a journal entry. A journal entry shows the record of
the effects of a transaction or an event expressed in terms of debit and credit. An entry
with one debit and one credit is a simple journal entry, while an entry with one or more
debits and credits is a compound journal entry. A journal entry has the following
elements:
1.    The date of the transaction
2.    The accounts debited and credited
3.    The monetary values of the accounts debited and credited
4.    The posting reference code of the destination ledger account
5.    A brief and clear explanation of the transaction

The accountable transactions are recorded in the general journal following the Basic
Accounting Equation:

Assets = Liabilities + Equity

This equation will guide the bookkeeper in recording the transaction. Under the double-
entry accounting system, at least two accounts will be recorded for each accountable
transaction. After the recording of each transaction using a journal entry, the accounting
equation will maintain its equality.

Effect of Accounting Entries to the Accounts

General Journal

The General Journal is the books of original entry. The journal entries transactions are recorded
chronologically with the appropriate accounts and amounts. It contains columns to contain the
five elements of journal entries. A sample General Journal is as follows:

Posting
Dat Account Title / Debi Credi
Referenc
e Explanation t t
e

Exercise:
Record the following transactions in a General Journal:

Mr. Luca Pacioli established Pacioli General Services and had the following transactions for the
month of January:

Jan 2 Investment of P100,000 capital funds by Mr. Pacioli into the business

Receipt of a Charge Invoice from a supplier for the purchase of a desktop computer amounting to
Jan 7
P30,000.

Jan 9 Purchase of supplies amounting to P8,000 in cash.

Jan Issuance of a Service Invoice for an amount of P40,000 to a customer for services rendered on
15  account.

Jan 17 Receipt of P28,000 cash from customers in payment of their account.

Payment in cash and receipt of an official receipt from supplier for payment of accounts,
Jan 22
P22,000.

Jan
Cash payment of P12,000 for the salary of an employee.
31 

Jan
Mr. Pacioli withdrew P10,000 cash from the business
31 

Posting to the General Ledger

After the entries are recorded in the journal, the entries are posted into the ledger. A
ledger is a collection of all of the accounts of the company. It is the book of final entry.
Each account has an assigned account number and the individual accounts are properly
arranged.

Each journal entry is posted into the related ledger account, indicating the date,
description debits and credits, and the posting reference. The posting reference serves
as the cross-reference between the journal entry and the ledger account posting.

Illustration: Post the following transactions into the General Ledger:

Postin
Date Account Title and Explanation    Debit Credit
g
2021
Jan P100,00
Cash 101
2 0
P100,00
Pacioli, Capital 301
0
To record capital investment.
 
7 Equipment 151 30,000
Accounts Payable 201 30,000
To record purchase of computer equipment on
account.
  121 7,000
9 Supplies 101 7,000
Cash
To record purchase of supplies in cash.
  
15 Accounts Receivable 111 40,000
Service Income 401 40,000
To record income from services rendered to
customers.
 
17 Cash 101 28,000
Accounts Receivable 111 28,000
To record collection from customers.
 
22 Accounts Payable 201 22,000
Cash 101 22,000
To record payment to supplier.
 
31 Salaries Expense 601 12,000
Cash 101 12,000
To record payment of employee salaries.
 
31 Pacioli, Drawing 311 10,000
Cash 101 10,000
To record withdrawal of capital.

Sample posting to the General Ledger:

Trial Balance
The trial balance is a listing of all the balances of the different accounts as of a given
date. The total of all accounts with debit balances must equal to the total of all accounts
with credit balances.

Purpose of Trial Balance:

 To check the accuracy of posting in the ledger by testing the equality of the debits and
credits.
 It aids in locating errors in posting.
 It serves as the basis in the preparation of the financial statements.

Errors in The Accounting Process

When the total debits and total credits are not equal, this automatically signify that there is an
error in the recording or posting of entries. Some of the errors that could occur are the
following:

 Journal entry with unequal debit and credit.

 Posting to the incorrect debit or credit of an account.
 Incorrectly footing the account balance, or trial balance.
 Forwarding the wrong amount from the ledger to the trial balance.
 Listing the account balance to the wrong side of the trial balance.

The following errors will not be detected by the preparation of a trial balance, but on a careful
review of the records:

 Failing to record a transaction or event.

 Multiple recording and posting of a transaction or event.
 Entries or posting to the wrong account.
 Reversed entries and posting.
 Recording and posting of amounts with transposition and trans-placement errors.

Types of Trial Balance

1. Unadjusted Trial Balance

2. Adjusted Trial Balance
3. Post-Closing Trial Balance
Which document is issued by a vendor or supplier for items or goods rendered the
company? It is called Sales Invoice from the point of view of the supplier.
Select one:

a.

Purchase invoice

b.

Official receipt

c.

Disbursement voucher

d.

Order slip
Feedback
Your answer is correct.

The correct answer is: Purchase invoice

Question 2
Correct

Mark 1.00 out of 1.00

Flag question

Question text
Which of the following is true about debits and credits?
Select one:

a.
Increases in assets and liabilities are always debited.

b.

Increases in owner’s equity and decreases in liabilities are always credited.

c.

Decreases in owner’s equity and drawing are always debited.

d.

Decreases in assets and increases in liabilities are always credited.

Feedback
Your answer is correct.

The correct answer is: Decreases in assets and increases in liabilities are always credited.

Question 3
Correct

Mark 1.00 out of 1.00

Flag question

Question text
Accounting is

a.

the process of recording, classifying and summarizing business transactions for the
proper determination of correct tax declarations and payments.

b.
the person who keeps and maintains the books of accounts of the business
organization. The bookkeeper is responsible for recording the transactions of the
business.

c.

the art of recording, classifying, and summarizing in a significant manner and in terms of
money, transactions and events which are, in part at least of financial character, and
interpreting the results thereof.

d.

the recording of financial transactions.

Feedback
Your answer is correct.

The correct answer is:

the art of recording, classifying, and summarizing in a significant manner and in terms of
money, transactions and events which are, in part at least of financial character, and
interpreting the results thereof.

Question 4
Correct

Mark 1.00 out of 1.00

Flag question

Question text
A transaction or event is accountable when it meets the following criteria, except:
Select one:

a.

It can be measured in terms of money

b.

It is a personal transaction of the owner

c.

It affects the business entity

d.

If affects the assets, liabilities or equity of the business

e.

It is supported by a document
Feedback
Your answer is correct.

The correct answer is: It is a personal transaction of the owner

Question 5
Correct

Mark 1.00 out of 1.00

Flag question

Question text
The bookkeeper is

a.

the process of recording, classifying and summarizing business transactions for the
proper determination of correct tax declarations and payments.

b.
the recording of financial transactions and is part of the process of accounting in
business.

c.

the person who keeps and maintains the books of accounts of the business
organization, and is responsible for recording the transactions of the business.

d.

the artist of recording, classifying, and summarizing in a significant manner and in terms
of money, transactions and events which are, in part at least of financial character, and
interpreting the results thereof.
Feedback
Your answer is correct.

The correct answer is:

the person who keeps and maintains the books of accounts of the business
organization, and is responsible for recording the transactions of the business.

Question 6
Correct

Mark 1.00 out of 1.00

Flag question

Question text
Which is not a basic characteristic of a business?

a.

A regular activity

b.

Involves commercial activities

c.

Conducted for profit

d.

Social marketing
Feedback
Your answer is correct.

The correct answer is:

Social marketing

Question 7
Incorrect

Mark 0.00 out of 1.00

Flag question

Question text
If the totals of a trial balance are not equal, it may indicate that
Select one:

a.

A transaction is not recorded

b.

The balance of one account is incorrectly computed

c.

A transaction has been recorded twice

d.

A transaction has been recorded with an erroneous amount on both debit and credit
Feedback
Your answer is incorrect.

The correct answer is: The balance of one account is incorrectly computed

Question 8
Incorrect

Mark 0.00 out of 1.00

Flag question

Question text
Which transaction decreased both total assets and total liabilities by P10,000?
Select one:

a.

Payment of accounts payable, P10,000

b.

Purchase of equipment for cash, P10,000

c.

Collection of accounts receivable, P10,000

d.

Payment of salaries, P10,000

Feedback
Your answer is incorrect.
The correct answer is: Payment of accounts payable, P10,000

Question 9
Correct

Mark 1.00 out of 1.00

Flag question

Question text
What are the elements of a journal entry?

I. The date of the transaction

II. The accounts debited and credited
III. The monetary values of the accounts debited and credited
IV. The posting reference code of the destination ledger account
V. A brief and clear explanation of the transaction

Select one:

a.

I, II and III only

b.

I, II, III and IV only

c.

I, II and IV only

d.

I, II, III, IV and V

Feedback
Your answer is correct.
The correct answer is: I, II, III, IV and V

Question 10
Incorrect

Mark 0.00 out of 1.00

Flag question

Question text
The recording phase of financial accounting covers the following except
Select one:

a.

Transactions are recorded in the journal

b.

Posting to the ledger

c.

Financial statements are prepared

d.

Source documents are gathered and analyzed

Feedback
Your answer is incorrect.

The correct answer is: Financial statements are prepared

Question 11
Correct

Mark 1.00 out of 1.00

 Flag question

Question text
Which is not a type of business?

a.

Philanthropy

b.

Servicing

c.

Merchandising or trading

d.

Manufacturing
Feedback
Your answer is correct.

The correct answer is:

Philanthropy

Question 12
Correct

Mark 1.00 out of 1.00

Flag question
Question text
It contains the specific titles and codes to be used in recording transactions
Select one:

a.

General Journal

b.

General Ledger

c.

Trial Balance

d.

Chart of Accounts
Feedback
Your answer is correct.

The correct answer is: Chart of Accounts

Question 13
Correct

Mark 1.00 out of 1.00

Flag question

Question text
Which is not one of the legal requirements of a business?

a.

Conduct profitable activities

b.

Secure business registration certificates and permits

c.

Maintain accounting records

d.

Issue receipts and invoices

Feedback
Your answer is correct.

The correct answer is:

Conduct profitable activities

Question 14
Correct

Mark 1.00 out of 1.00

Flag question

Question text
The following are examples of service businesses except

a.

Spendmore Supermarket

b.

Azina Water Refilling Station

c.

Philippine Airlines

d.

Cagayan River Hotel and Resorts

Feedback
Your answer is correct.

The correct answer is:

Spendmore Supermarket

Question 15
Correct

Mark 1.00 out of 1.00

Flag question

Question text
The form of business organization owned by stockholders

a.

Non-profit organization

b.

Partnership

c.

Sole proprietorship

d.
Corporation
Feedback
Your answer is correct.

The correct answer is:

Corporation

Question 16
Incorrect

Mark 0.00 out of 1.00

Flag question

Question text
Which of the following cannot be recorded into the company’s books of accounts?
Select one:

a.

Invoices for supplies purchased have been received but not yet paid.

b.

The proprietor withdrew a certain amount of cash from the business.

c.

One month telephone services have been utilized but the bill has not yet arrived.

d.

Repair services have been rendered to a customer but not yet collected.
Feedback
Your answer is incorrect.
The correct answer is: One month telephone services have been utilized but the bill has not yet
arrived.

Question 17
Correct

Mark 1.00 out of 1.00

Flag question

Question text
Which of the following gives the best definition of bookkeeping?

a.

To calculate the amount of tax to be paid to BIR.

b.

To provide financial information to users.

c.

To record, classify and summarize financial transactions and events.

d.

To calculate the amount of profit to be paid to investors.

Feedback
Your answer is correct.

The correct answer is:

To record, classify and summarize financial transactions and events.

Question 18
Correct

Mark 1.00 out of 1.00

 Flag question

Question text
A business of two or more persons who bind themselves to contribute money, property
or industry to a common fund, with the intention of dividing the profits among
themselves

a.

Partnership

b.

Sole proprietorship

c.

Cooperative

d.

Corporation
Feedback
Your answer is correct.

The correct answer is:

Partnership

Question 19
Correct

Mark 1.00 out of 1.00

 Flag question

Question text
Which of the following entries record the purchase of an equipment by issuing a
promissory note?
Select one:

a.

Debit notes receivable and credit equipment

b.

Debit equipment and credit notes receivable

c.

Debit notes payable and credit equipment

d.

Debit equipment and credit notes payable

Feedback
Your answer is correct.

The correct answer is: Debit equipment and credit notes payable

Question 20
Correct

Mark 1.00 out of 1.00

Flag question
Question text
Which may not be a function of a bookkeeper?

a.

Record sales and collections

b.

Record inventory movements

c.

Record purchases and payments

d.

Approve transactions
Feedback
Your answer is correct.

The correct answer is:

Approve transactions
What is the normal order of accounts in the trial balance?
Select one:

a.

Assets, liabilities, revenues and expenses

b.

Assets, capital, revenues, expenses and liabilities

c.

Assets, liabilities, capital

d.

Assets, liabilities, capital, revenues and expenses

Feedback
Your answer is correct.

The correct answer is: Assets, liabilities, capital, revenues and expenses

Question 2
Correct

Mark 1.00 out of 1.00

Flag question

Question text
Which of the following gives the best definition of bookkeeping?

a.

To calculate the amount of tax to be paid to BIR.

b.

To provide financial information to users.

c.

To record, classify and summarize financial transactions and events.

d.

To calculate the amount of profit to be paid to investors.

Feedback
Your answer is correct.

The correct answer is:

To record, classify and summarize financial transactions and events.

Question 3
Correct

Mark 1.00 out of 1.00

Flag question

Question text
Transactions are recorded chronologically in the
Select one:

a.

General Ledger

b.

Trial Balance

c.

Chart of Accounts

d.

General Journal
Feedback
Your answer is correct.

The correct answer is: General Journal

Question 4
Correct

Mark 1.00 out of 1.00

 Flag question

Question text
Which is not one of the legal requirements of a business?

a.

Pay business permits and licenses

b.

Withhold taxes on certain payments

c.

File and pay taxes

d.

Maintain profitability
Feedback
Your answer is correct.

The correct answer is:

Maintain profitability

Question 5
Correct

Mark 1.00 out of 1.00

Flag question
Question text
Which is not a form of business organization?

a.

Sole proprietorship

b.

Business association

c.

Partnership

d.

Corporation
Feedback
Your answer is correct.

The correct answer is:

Business association

Question 6
Correct

Mark 1.00 out of 1.00

Flag question

Question text
In terms of debits and credits, which accounts have the same normal balances?
Select one:

a.
Accounts receivable, Accounts payable, Capital

b.

Account payable, Rental revenue, Unearned rental revenue

c.

Prepaid expenses, Insurance expense, Capital

d.

Rental expense, Professional fees, Drawing

Feedback
Your answer is correct.

The correct answer is: Account payable, Rental revenue, Unearned rental revenue

Question 7
Correct

Mark 1.00 out of 1.00

Flag question

Question text
Which is not one of the legal requirements of a business?

a.

Issue receipts and invoices

b.

Secure business registration certificates and permits

c.

Maintain accounting records

d.

Conduct profitable activities

Feedback
Your answer is correct.

The correct answer is:

Conduct profitable activities

Question 8
Incorrect

Mark 0.00 out of 1.00

Flag question

Question text
If the totals of a trial balance are not equal, it may indicate that
Select one:

a.

A transaction has been recorded twice

b.

A transaction is not recorded

c.

The balance of one account is incorrectly computed

d.

A transaction has been recorded with an erroneous amount on both debit and credit
Feedback
Your answer is incorrect.

The correct answer is: The balance of one account is incorrectly computed

Question 9
Incorrect

Mark 0.00 out of 1.00

Flag question

Question text
Journalizing involves
Select one:

a.

Preparation of various source documents before recording the transactions in the

general journal

b.

Transferring the amounts from the source documents to the general journal in the form
of journal entry

c.

Transferring the amounts from the general ledger to the trial balance

d.

Transferring the amount from the general journal to the general ledger
Feedback
Your answer is incorrect.

The correct answer is: Transferring the amounts from the source documents to the general
journal in the form of journal entry

Question 10
Correct

Mark 1.00 out of 1.00

Flag question

Question text
A journal entry records the effects of a transaction or an event expressed in terms of
debit and credit. Which of the following is not a correct journal entry?
Select one:

a.

An entry with one debit and two or more credits

b.

An entry with one or more debits only

c.

An entry with one debit and one credit

d.

An entry with two or more debits and one credit

Feedback
Your answer is correct.

The correct answer is: An entry with one or more debits only
Question 11
Correct

Mark 1.00 out of 1.00

Flag question

Question text
It is the simplest form of business organization

a.

Service entity

b.

Partnership

c.

Merchandising entity

d.

Sole proprietorship
Feedback
Your answer is correct.

The correct answer is:

Sole proprietorship

Question 12
Incorrect

Mark 0.00 out of 1.00

 Flag question

Question text
Which of the following entries record the receipt of an electric bill which will paid next
month?
Select one:

a.

Debit utilities expense and credit utilities payable

b.

Debit utilities expense and credit notes payable

c.

Debit utilities payable and credit cash

d.

Debit utilities expense and credit cash

Feedback
Your answer is incorrect.

The correct answer is: Debit utilities expense and credit utilities payable

Question 13
Correct

Mark 1.00 out of 1.00

Flag question
Question text
The bookkeeper is

a.

the person who keeps and maintains the books of accounts of the business
organization, and is responsible for recording the transactions of the business.

b.

the process of recording, classifying and summarizing business transactions for the
proper determination of correct tax declarations and payments.

c.

the artist of recording, classifying, and summarizing in a significant manner and in terms
of money, transactions and events which are, in part at least of financial character, and
interpreting the results thereof.

d.

the recording of financial transactions and is part of the process of accounting in

business.
Feedback
Your answer is correct.

The correct answer is:

the person who keeps and maintains the books of accounts of the business
organization, and is responsible for recording the transactions of the business.

Question 14
Correct

Mark 1.00 out of 1.00

Flag question
Question text
A business of two or more persons who bind themselves to contribute money, property
or industry to a common fund, with the intention of dividing the profits among
themselves

a.

Corporation

b.

Sole proprietorship

c.

Partnership

d.

Cooperative
Feedback
Your answer is correct.

The correct answer is:

Partnership

Question 15
Correct

Mark 1.00 out of 1.00

Flag question

Question text
Which of the following is a simple journal entry?
Select one:
a.

An entry with two or more debits and one credit

b.

An entry with one debit and one credit

c.

An entry with one debit and two or more credits

d.

An entry of one debit only

Feedback
Your answer is correct.

The correct answer is: An entry with one debit and one credit

Question 16
Correct

Mark 1.00 out of 1.00

Flag question

Question text
Bookkeeping is

a.

the art of recording, classifying, and summarizing in a significant manner and in terms of
money, transactions and events which are, in part at least of financial character, and
interpreting the results thereof.
b.

the process of recording, classifying and summarizing business transactions for the
proper determination of correct tax declarations and payments.

c.

the recording of financial transactions and is part of the process of accounting in

business.

d.

the person who keeps and maintains the books of accounts of the business
organization. The bookkeeper is responsible for recording the transactions of the
business.
Feedback
Your answer is correct.

The correct answer is:

the recording of financial transactions and is part of the process of accounting in

business.

Question 17
Correct

Mark 1.00 out of 1.00

Flag question

Question text
Which of the following is true about trial balance?
Select one:

a.

If total debits is equal to total credits, it is a proof that no mathematical error has been
committed.
b.

It is a list of all accounts with open balances.

c.

The trial balance is a proof that all transactions are recorded correctly if it is balanced.

d.

The trial balance will not balance if a transaction is recorded twice.

Feedback
Your answer is correct.

The correct answer is: It is a list of all accounts with open balances.

Question 18
Correct

Mark 1.00 out of 1.00

Flag question

Question text
Which is not a type of business?

a.

Servicing

b.

Philanthropy

c.
Manufacturing

d.

Merchandising or trading
Feedback
Your answer is correct.

The correct answer is:

Philanthropy

Question 19
Correct

Mark 1.00 out of 1.00

Flag question

Question text
Which document is issued to acknowledge receipt of cash?
Select one:

a.

Official receipt

b.

Sales invoice

c.

Purchase invoice

d.
Delivery receipt
Feedback
Your answer is correct.

The correct answer is: Official receipt

Question 20
Correct

Mark 1.00 out of 1.00

Flag question

Question text
Which may not be a function of a bookkeeper?

a.

Record cash receipts and payments

b.

Record employee attendances

c.

Record sales invoices

d.

Record purchase invoices

Feedback
Your answer is correct.

The correct answer is:

Record employee attendances