Integrated Accounting for

Business 1

FOR INSTRUCTIONAL MATERIALS ONLY

Grading Components
COMPONENT PERCENTAGE
Attendance and Recitation 10%
Performance Tasks 20%
Short Quizzes 15%
Long Examinations 25%
Final Examinations 30%
 • This course is designed for individuals
without accounting background but who
Course need to understand and appreciate how
Description business transactions are recorded,
summarized, and interpreted for decision-
making purposes.
 Coverage

Introduction to Accounting Accounting Rules and Regulations The Accounting Cycle

Definition Boundary Rules Anaysis of Business Transactions

History of Accounting Measurement Rules Journalization
Branches of Accounting Ethical Rules Posting
Users of Accounting Information Trial Balance
Forms of Business Organization Adjusting Entries
Basic Financial Statements Adjusted Trial Balance
Financial Satements
Closing Entries
Post Closing Trial Balance
Reversing Entries
INTRODUCTION
TO
ACCOUNTING

FOR INSTRUCTIONAL MATERIALS ONLY

 Nature • Accounting is a service provided

and for those who need information

about an entity’s performance, its
assets and liabilities.
Purpose
Activity 1 *
Look up the definition of accounting in three different sources.
Copy the definitions into your notebook, then outline your ideas about
how accounting and accounting information, as defined in the sources
you referred to, could be helpful to you in the job or career you aspire
to be in (in, say, 5 or 10 years time).

For submission on our 1st Face to Face meeting.*

 The word “account”

Historical Primitive era

Development
Reasons why a recording
system was devised
Primitive Accounting
There are two main reasons why a recording system devised in
medieval times has lasted for so long:

●It provides an accurate record of what has happened to a business

over a given period of time.

●Information extracted from the system can help the owner or the
manager to operate the business much more effectively
Basic Questions:

The system provides the answers

to three basic questions that ● What profit has the business
both owners and managers want made?
to know. They are as follows:

● How much does the business ● What does the business have
owe? and how much is owed to it?
Branches of
Accounting
Users of
Accounting
Information
• Investors
• Employees
• Lenders
• Suppliers and other trade
creditors
• Customers
• Government and other agencies
• Public
 Sole Proprietor
Forms of
Business Partnership
Organization
Corporation
Activity 2
If you were given the chance to start a business, what would it be? In
the table below, insert one advantage and one disadvantage of
operating your business as (a) sole proprietor), (b) partnership and ©
corporation.
TYPE OF ENTITY ADVANTAGE DISADVANTAGE
(a) Sole Proprietor
(b) Partnership
© Corporation
Deadline : Activity notebook to be submitted on April 8.
Basic Financial Statements
• Income Statement – Statement of Financial Performance
• Balance Sheet – Statement of Financial Position
• Statement of Cash Flow
• Statement of Owner’s Equity
• Notes to Financial Statements
Accounting Rules & Regulations

FOR INSTRUCTIONAL MATERIALS ONLY

Learning Objectives

By the end of this topic, you 1. Identify the basic accounting

should be able to: rules
The Basic Accounting Rules
Boundary Rules

Going Monetary
Entity Periodicity
Concern Quantities
Entity
• The affairs of a business is
separate from the private affairs
of its owners.
 The accounting
Periodicity period is accepted to
(or Period be 12 months.

of
Account)
Going Concern
• In accounting, an entity is said to be a going
concern if it is assumed that it will continue in
business for the foreseeable future for at least next
12 months from the accounting year end.
Monetary
Quantities
• Accounting information is usually
restricted to that which can be
easily quantified in monetary
terms.
 This determines how data
should be recorded.
• Money measurement
Measurement • Historical cost
Rules
• Realization
• Matching
• Dual Aspect
• Materiality
 Money
Measurement
What monetary value needs to be attributed? How
can that which counts be measured in money?
Historic Cost
• Assets and Liabilities are usually valued at their
historic cost, i.e., the price paid or received for
them when they were originally exchange.
Realization
• When goods are sold or purchase or sold on credit
terms, it is customery practice to treat them as
being exchange at the point when the legal title to
the goods is transferred, i.e., when they are
realized.
Matching
• Accounts are not usually
prepared on the basis of cash
received and cash paid during a
12-month period.
Dual Aspect
• Basic rule: every transaction has
two effects. As a result, a
recording system known as
double entry bookkeeping has
evolved.
Materiality
• Materiality is a matter of context;
it requires judgement and different
people will come to a different
conclusion.
Ethical rules
There are four main ethical
Ethical rules relate to the rules:
moral code or principles to • Prudence
be adopted in the • Consistency
preparation of accounts. • Objectivity
• Relevance
Prudence
(Conservatism)
• The rule states that if there is some doubt over
the treatment of a particular transaction, then
income should be understated and expenditure
overstated.
Consistency
The same accounting
policies and rules should be
followed in successive
accounting periods.
Objectivity

This rules requires accountants and managers to avoid personal bias

and prejudice when selecting and applying the accounting rules.

Accounting records are based on information that flows from activities

documented by objective evidence.
Relevance

• Financial statements should not include

matters that prevent users from learning what
they need to know. Financial statemeents
should give a true and fair view of the financial
affairs of the entity.
Problem (1)
• Which of the following events would be recognized in the accounting
records of Rogelio Ceradoy Company on the date indicated?
Feb 15. Ceradoy Company offers to purchase a piece of land for
P1,400,000. There is a high likelihood that the offer will be accepted

Mar 2. Ceradoy Company receives notice that its rentals for an office
space will increase from P50,000 to P60,000 per month effective April
1.
Problem (2)
Fill in the amount of the missing element of financial position

Assets Liabilities Owner’s Equity

a.760,000 360,000 ?
b.860,000 ? 592,000
c.? 108,000 760,000
d.626,600 376,240 ?
e.? 800,000 (100,000)
Problem (3)
Supply the missing element of performance

Income Expense Profit (Loss)

a. 840,000 ? 360,00
b. 2,400,000 ? 540,000
c. 1,300,000 860,000 ?
d. ? 2,000,000 720,000
e. ? 1,800,000 (400,000)
Problem (4)
In each of the preceding five situations, determine the amount of the
missing element of performance
a.A small accounting firm has income of P325,000 and expenses of P237,000
b.An advertising agency has expenses of P163,000 and profit of P42,000
c.A computer training outfit has expenses of P153,000 and loss of P27,5000
d.A medical practitioner has income of P737,000 and profit of P168,000
e.An environment consultant has income of P362,000 and loss of P20,000
Problem (5)
• Which of the following events would be recognized in the accounting
records of Rogelio Ceradoy Company on the date indicated?
Feb 15. Ceradoy Company offers to purchase a piece of land for
P1,400,000. There is a high likelihood that the offer will be accepted

Mar 2. Ceradoy Company receives notice that its rentals for an office
space will increase from P50,000 to P60,000 per month effective April
1.
April 29. Ceradoy Company receives its
electricity bill for the month of April. The bill
is due on May 9.

July 10. Ceradoy Company places an order

for an office equipment costing P108,000.

Aug 6. The office equipment ordered on July

10 is delivered. Payment is not due until
Sept 1.
FINANCIAL ACCOUNTING

FOR INSTRUCTIONAL MATERIALS ONLY

Registration of a Sole Proprietor in Business
1. Register a business name at the Department of Trade and
Industry
2. Bureau of Internal Revenue
3. Local Government Units where your business is located:
1. Barangay
2. Mayor’s Office
4.If you have employees, you need to register to the following:
1. Social Security System
2. Philippine Health Insurance Corporation
3. Home Development Mutual Fund
Types of
Books
Manual Books
• Manual is a traditional type of book that is most
popular type as of this writing. Majority of Micro Small
Medium Enterprises (MSMEs) uses manual books
because it is the easiest to register with the BIR.
• Manual Books consist of columnar books you can buy
from office supplies store and then register or submit it
for stamping in BIR RDO where the taxpayer has
registered. Once registered, business transactions are
hand-written on a regular basis.
Loose Leaf Books

• Loose leaf is the least popular in the past years. But there is
an increasing awareness that this option is available.
• Loose leaf is a type of book that uses Microsoft Excel or any
equivalent. But before you can do so, you must apply for a
Permit to Use (PTU) in BIR. You can submit your Application
for Permit to Use Loose Leaf (BIR Form 1900) via BIR’s Online
Registration and Update System (ORUS). However, you need
to have ORUS account before you can do so. You can apply
for access in ORUS in your BIR Regional District Office (RDO).
(Update: 01122024)
• Once there’s Permit to Use (PTU) Loose leaf, at the end of
the year, print the journals/ledgers and hand-bound it. After
which, submit it to the BIR RDO on or before January 15 of
next calendar year online via ORUS. (Updated: 01122024 per
RMC 3-2023)
Computerized Books

• Large Taxpayers often uses Computerized Books. But due to rising

popularity of automation and affordable software just like MPM
Accounting Software, even MSMEs, self-employed or professionals
are now using and registering computerized books.
• Per Revenue Memorandum Circular (RMC) 5-2021, it is no longer
necessary to apply for Permit to Use (PTU) computerized books,
instead, you only need to complete and submit the checklist of
requirements via ORUS or BIR RDO. To signify acceptance, the BIR
will issue you an Acknowledgement Receipt.
• But just like Loose leaf Books, every end of the year, you must
submit soft copies of your computerized accounting records via
ORUS or BIR RDO on or before January 30 of the next calendar
year. (Updated: 01122024 per RMC 3-2023)
Types of Books
Every taxpayer needs to prepare and manage the following books:
• CASH RECEIPTS – These are sales receipts you get every month. It divides into
Vatable and Non-vatable sales, and include the Output VAT.

• CASH DISBURSEMENT – Keeps track of cash issued. Purchases are set into
Vatable and Non-vatable purchases as well as the Input VAT.

• GENERAL JOURNAL

• GENERAL LEDGER- It shows the summary of debits and credits made by the
company
Four Key Steps in Bookkeeping Basics

1.Collect all the documents you need, including bank

statements, check and deposit records. You will also need
vendor bills, purchase receipts and invoices.
2.Record this information from the source documents to your
books.
3.Perform procedures like balancing accounts and
reconciliations
4.Close the books.
Accounting Cycle
The Accounting Cycle
The accounting cycle refers to a series of sequential steps or
procedures performed to accomplish the accounting process.
The Accounting
Cycle
Accounting for Business Transactions
A business transaction is the occurrence of an event or a condition that
affects financial position and can be reliably recorded.
Source Documents
Transactions and events are the starting points in the accounting cycle.
These are the bases for the journal entries some of the more common
sources are
1. sales invoices
2. official receipts
3. bank deposit slips
4. checks
5. purchase orders,
6. time cards.
 SALES
INVOICE
OFFICIAL
RECEIPTS
Bank Deposit
Slip
Checks
New Check Format (starting May 1, 2024)
Purchase
Orders
Accounting Terminologies
STATEMENT OF FINANCIAL POSITION

Current Assets

Cash. Any medium of exchange that a bank will accept for deposit at
face value. It includes coins, currency, checks, money orders, bank
deposits and drafts.
Cash Equivalents. Short term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value.
Notes Receivable. A note receivable is a written pledge that the
customer will pay the business a fixed amount of money on a certain
date.
Accounts Receivable. These are claims against customers arising
from sale of services or goods on credit. This type of receivable
offers less security than a promissory note.
Inventories. Assets which are
(a) held for sale in the ordinary course of business
(b) in the process of production for such sale;
(c) in the form of materials or supplies to be consumed in the
production process or in the rendering of services.
Prepaid Expenses. These are expenses paid for by the
business in advance.
Non-current assets

Property, Plant and Equipment. Tangible assets that are held by

an enterprise for use in the production and supply of goods or
services, or for rental to others, or for administrative purposes
and which are expected to be used during more than one period.
Accumulated Depreciation. It is a contra account that
contains the sum of the periodic depreciation charges.
Intangible Assets. Nonmonetary assets without physical
substance held for use in the production or supply of goods or
services, for rental to others, or for administrative purposes.
Current Liabilities

Accounts Payable. This account represents the reverse

relationship of accounts receivable. By accepting the goods and
services, the buyer agrees to pay for them in the near future.
Notes Payable. A note payable is like a notes receivable but in
the reserve sense. The business entity is the maker of the note;
that is, the business entity is the party who promises to pay the
other party a specified amount of money on a specified future
date.
Accrued Liabilities. Amounts owed to others for unpaid
expenses. This account includes salaries payable, utilities
payable, interest payable and taxes payable.
Unearned Revenues. When the business entity receives
payment before providing customers with goods or services
Current Portion of Long Term Debt. These are portions of
mortgage notes, bonds and other long-term indebtedness which
are to be paid within one year from the balance sheet data.
Non-Current Liabilities

Mortgage Payable. This accounts records long-term debt of the

business entity for which the business entity has pledged certain
assets as security to the creditor.
Bonds Payable. Business organizations often obtain substantial
funds of money from lenders to finance the acquisition of
equipment and other needed assets. They obtain these funds
by issuing bonds. The bond is a contract between the issuer
and the lender specifying the terms of repayment and the
interest to be charged.
 INCOME STATEMENT
Income

Service Income. Revenues earned by performing services for a

customer or client.

Sales. Revenues earned as a result of sales of merchandise.

Expenses

Cost of Sales. The cost incurred to purchase or to produce

the products sold to customers during the period.

Salaries or Wages Expense. Includes all payment as a result of

an employer-employee relationship.
Telecommunications, Electricity, Fuel and
Water Expenses. Expenses related to
telecommunications facilities, consumption
of electricity, fuel and water.

Rent Expense. Expense for space, equipment

or other asset rentals.

Supplies Expense. Expense of using supplies

in the conduct of daily business.
Insurance Expense. Portion of premiums paid on insurance
coverage which has expired.

Depreciation Expense. The portion of the cost of a tangible

asset allocated or charged as expense during an accounting
period.

Uncollectible Accounts Expense. The amount of receivables

estimated to be doubtful of collection and charged as expense
during an accounting period.
Interest Expense. An expense related to the use of borrowed
funds.
 • NORMAL BALANCE OF AN ACCOUNT
ACCOUNT INCREASES REC. BY NORMAL BALANCE

DEBIT CREDIT DEBIT CREDIT

ASSETS X X

LIABILITIES X X

OWNERS CAPITAL X X

WITHDRAWALS X X

INCOME X X

EXPENSES X X
JOURNALIZATION
Posting to the Ledger
Problem (6)
Mari Aragon established her own business called Aragon’s Self Storage.
The account headings are presented below. Transactions completed
during the month follow:
Jan 11. Deposited P120,000 in a bank account in the name of the
business.

Jan 30. Bought office equipment on account from PHINMA Company,

P31,000, on account

Feb 15. Paid rent for the month, P24,000

Feb 25. Bought supplies for cash, P4,500.

Feb 28. Paid salaries, P9,800.

Mar 3. Received cash for storage services, P36,000.

Mar 5. Received and paid the utility bill, P2,520.

Mar 8. Paid Error Umerez Graphics for advertising, P4,280.

Mar 15. Paid for a one-year liability insurance policy coverage is

from April 1, P8,350.
Mar 29. Billed customers for storage services on account,
P33,700.

Apr 5. Received cash for storage services, P23,000.

Apr 15. Paid salaries, P9,900.

Apr 28. Paid PHINMA Company P11,000 as part payment on

the office equipment bought in transaction last Jan 30.

Apr 30. Mari Aragon Withdrew P12,000 for personal use.

Problem (7)
• On May 1, 2013, Mima Villanueva opened Self-Service Laundry. During
May, the following transactions were completed:
May 1. Villanueva deposited P250,000 in a bank account in the name of
the business.
May 2. Bought chairs and a table paying cash, P6,700.
May 3. Bought laundry supplies on account from Salvador Ho Supply
Company, P3,250.
May 4. Paid rent for the month, P5,750.
May 5. Bought washing machines and dryers from Iloilo Equipment
Company, P115,000, paying P35,000 in cash and the balance on account
May 6. Revenues earned on cash basis for the first half of the month
P19,250.
May 7. Bought insurance for one year, P5,600.
May 8. Paid accounts to Iloilo Equipment Company, P7,000.
May 9. Received and paid electric bill, P2,080.
May 10. Revenues earned on cash basis for the second half of the
month, P12,350.
May 11. Paid salaries of the part-time assistant, P7,400
May 12. Villanueva withdrew cash for personal use P5,000.
May 13. Paid accounts to Salvador Ho Supply company, P2,750.
May 14. Paid the city government for sidewalk repair assessment,
P2,800.
T-Account Analysis
 Problem (8)
• On March 1, 2023, Theodore Calaguas, M.D., established the Calaguas Sports Rehab
Clinic. Transactions completed during the month of March are as follows:

March 1. Calaguas deposited P250,000 in a bank account in the name of the business.

March 1. Paid rent for the month, P10,000.

March 5. Bought supplies on account from Shaw Company, P11,700.

March 10. Bought professional equipment on account from Rizal Company, P58,000.

March 15. Bought office equipment on account from Marikina Company, P8,640.

March 20. Performed professional services for cash, P48,200.

March 21. Settled a portion of the accounts with Rizal Company, P18,500.

March 23. Received and paid the bill for utilities, P3,820.

March 25. Paid salaries of assistants, P11,500.

March 30. Rendered professional services for cash, P38,000.

March 31. Calaguas withdrew cash for personal use, P16,000.

REQUIRED:
Record transactions for the month. Use the following accounts: Cash; Accounts
Receivable; Supplies; Prepaid Rent; Office Equipment; Professional Equipment;
Accounts Payable. Calaguas Capital, Calaguas Drawing, Professional services,
Salaries expense; Utilities Expense
Problem (9) Debits and Credits
Innovative Designs, owned by Leopoldo Medina, has been operating for
two years. Below is a series of transactions. For each transaction,
indicate, the accounts that should be debited and credited, if no entry
is required, write “n/a” in the columns. Use the following account
titles: Cash; Accounts Receivable; Supplies; Prepaid Expenses;
Equipment; Patents; Accounts Payable; Notes Payable; Salaries Payable;
Medina Capital; Medina, Withdrawals; Service Revenues and Operating
Expenses.
 TRANSACTIONS Debit Credit

a. Purchased equipment for use in the business; paid one-third

cash and gave a note payable for the balance.
b. Paid cash for salaries

c. Collected cash for services performed this period

d. Collected cash for services performed last period.

e. Performed services this period on credit.

f. Paid operating expenses incurred this period.

g. Paid cash for operating expenses incurred last period.

 TRANSACTIONS Debit Credit

h. Incurred operating expenses this period to be paid next

period.
i. Purchased operating expenses this period to be paid next
period.
j. Used some of the supplies from inventory for operations

k. Purchased a patent (an intangible) and paid cash.

l. Made a payment on the equipment in (a); the payment was

part principal and part interest expense.
m. Collected cash on accounts receivable for services previously
performed.
n. Paid cash on accounts payable for expenses previously
incurred.
Problem (10)
JKD, a dentist, established D Clinic. The following transactions incurred
during June this year:
a. D deposited P280,000 in a bank account in the name of the
business.
b. Bought a 3-in-1 office equipment from P Equipment for P4,950,
paying P1,000 in cash and the balance on account.
c. Bought waiting room chairs and a table, paying cash, P12,300
d. Bought office interncom on account from NE Office Supply, P2,750.
e. Received and paid the telephone bill, P1,080.
f. Performed professional services on account, P12,940.
g. Received and paid the electric bill, P1,850.
h. Received and paid the bill for the Regional Dental Convention,
P3,500.
i. Performed professional services for cash, P17,650.
j. Partially settled accounts with NE Office supply, P1,000.
k. Paid rent for the month, P8,400
l. Paid salaries of the part-time receptionist, P3,500
m. D withdrew cash for personal use, P8,500
n. Received P5,500 on accounts from patients who were previously
billed.
Required:
1. Journalize the transactions using the following account names:
Cash; Accounts Receivable; Office Equipment; Office Furniture;
Accounts Payable; D Capital; D Withdrawal; Professional Services;
Salaries Expense; Rent Expense; Utilities Expense and
Miscellaneous Expense
2. Post the journal entries into the T accounts.
3. Prepare a Trial Balance.
Problem 11 – Transaction Analysis
a. Received P260,000 cash from clients for services rendered.
b. Paid P480,000 salaries to employees
c. Collected P120,000 from clients on account.
d. The owner, Virginia Ruben, withdrew P80,000 cash for personal use.
e. Purchased P140,000 of supplies on account.
f. Billed clients P180,000 for services rendered.
g. Paid P100,000 to suppliers on account.
For each of the transactions for VR Antique Restorer, a sole
proprietorship, fill in the spaces to answer the following questions:
1. What are the two accounts affected by the transactions?
2. What type of account is affected – asset, liability, owner’s capital,
owner’s withdrawal, income or expense account?
3. Should the account be increased or decreased?
4. Should the account be debited or credited?
Problem 12
Complete the following table by stating the accounting element of each
account, and whether increases and decreases in the account are
represented by a debit or credit entry
a. Service Revenues g. Salaries Expense
b. Withdrawals h. Office Equipment
c. Utilities Expense i. Fixtures and Fittings
d. Rent Expense j. Interest Expense
e. Cash in bank k. Loan Payable
f. Trade Payables l. Capital
Problem 13 – Classification of Accounts
The following ledger accounts are used by Elizabeth Figueroa Tutorials:
a. Cash h. Land
b. Salaries Expense i. Supplies Expense
c. Accounts Receivable j. Prepaid Insurance
d. Figueroa, Capital k. Utilities Expense
e. Service Revenues l. Service Revenues
f. Prepaid Rent m. Figueroa, Withdrawals
g. Accounts Payable n. Salaries Payable
o. Unearned Revenues
p. Office Equipment
q. Rent Payable
r. Notes Receivable
s. Interest Expense
t. Notes Payable
u. Supplies
v. Interest Receivable
w. Rent Expense
Required: Indicate each account’s classification and normal balance by
placing (x) marks.
ADJUSTING THE ACCOUNTS
ADJUSTING THE ACCOUNTS

Adjusting entries assigned revenues to the period to which they are

earned and expenses to the period they are incurred.
Deferrals and Accruals
Deferrals is the postponement of the recognition of “an expense paid
but not yet incurred” or of “revenue already collected but not yet
earned”.

Accrual is the recognition of “an expense already incurred but unpaid”

or “revenue earned but uncollected”.
Adjustments for Accruals
1.Accrued Expenses
2.Accrued Interest
3.Accrued Revenues
4.Accrual for Uncollectible Accounts
Adjusting Entries for Deferrals
Allocating Assets to Expenses
1.Prepaid Expenses
2.Prepaid Rent
3.Prepaid Insurance
4.Supplies
5.Depreciation

Allocating Revenues Received in Advance to Revenues

Accrual of Interest Expense

Florenda Quino Forwarders borrowed P600,000 from the bank on September

1, 2023. The note carried an 8% annual rate of interest and was set to mature
on February 28, 2024. Interest and principal were paid in cash on the maturity
date.
Required:
1.What was the amount of interest expense paid in cash in 2023?
2.What was the amount of interest expense recognized on the 2023 income
statement?
3. What was the amount of total liabilities shown on
the 2023 balance sheet?
4. What was the total amount of cash that was pai
on the bank on February 28, 2024 for principal and
interest?
5. What was the amount of interest expense shown
on the 2024 income statement?
Accrual of Interest Revenue
Reynaldo San Mateo, an angel investor, decided to invest
P1,200,000 excess cash in a certificate of deposit on April 1,
2023. The certificate carried an 8% annual rate of interest and
a 1-year term to maturity. Interest for the month will be with
withdrawn on the following month. (disregard tax effects).

Required
1. What amount of income will be recognized for the year
ending December 31, 2023?
2. What is the effect of the adjusting entry on the accounting
equation?
3. What amount of cash will be collected for interest revenue in
2023?
4. What is the amount of interest receivable as of December 31,
2023?
5. What amount of cash will be collected interest in 2024?
6. What amount of interest revenue will be recognized in 2024?
7. What is the amount of interest receivable as of December 31,
2024?
Preparing Adjusting Entries

Using T accounts, record the adjusting entries for each of the situations
listed below. The last day of the accounting period is Dec 31.
a.Three-days salaries are unpaid as at Dec. 31. Salaries are P75,000 for
a five-day work week.
b.On Aug. 1, a P18,000 premium was paid on a one-year insurance
policy. The amount of the premium was debited to Prepaid Insurance.
c.Before adjustments, the Supplies account ahs a balance of P35,400.
The count of supplies on hand amounted to P22,300.
Preparing Adjusting Entries

Prepare the adjusting entry for Christine Gamba Company under each
of the following for the year ending Dec. 31, 2013:
a.Paid P240,000 for a 1-year fire insurance policy to commence on Sept
1. The amount of premium was debited to Prepaid Insurance.
b.Borrowed P100,000 by issuing a 1-year note with 7% annual interest
to Century Savings Bank on October 1, 2013.
c.Paid P160,000 cash to purchase a delivery van (surplus) on Jan. 1. The
van was expected to have a 3-year life and a P10,000 salvage value.
Depreciation is computed on a straight-line basis.
d. Received an P18,000 cash advance for a contract to
provide services in the future. The contract required a 1-
year commitment, starting April 1.
e. Purchased P6,500 of supplies on account. At year’s
end, P750 of supplies remained on hand.
f. Invested P90,000 cash in a certificate of deposit that
paid 4% annual interest. The certificate was acquired on
May 1 and carried a 1-year term to maturity.
g Paid P78,000 cash in advance on Sept. 1 for a 1-year
least on office space.’
Preparing Adjusting Entries
On June 30, 2023, the end of fiscal year, the following information is
available to Dennis Sandoval Company’s accounts for making adjusting
entries:
a.Among the liabilities of the company is a P2,400,000 mortgage
payable. On June 30, accrued interest on this mortgage is P120,000.
b.Assume that on July 2, a Friday, the company which is on a five day
workweek and pays employees, weekly, paid its regular salaried
employees P192,000
c.On June 29, the company completed negotiations and signed a
contract to provide services to a new client at an annual rate of
P36,000
d. The supplies account showed a beginning balance of P16,150 and
purchases during the year of P37,660. The year end inventory
revealed supplies on hand of P11,860.
e. The prepaid insurance account showed the following entries on
June 30:
Beginning Balance P15,300
January 1 29,000
May 1 33,660
The beginning balance represents the unexpired portion of a one-year
policy purchased in April 1 of previous year. The January 1 entry
represented a one-year policy, and the May 1 entry is the additional
coverage of a three year policy.
f. The following table contains the cost and annual depreciation for
buildings and equipment all of which were purchased before the
current year:
g. On June 1, the company negotiations with another client and
accepted an advance of P210,000 for services to be performed in
the next year. The P210,000 was credited to Unearned Service
Revenues.
h. The company calculated that as at June 30 it had earned P35,000
on a P75,000 contract that will be completed and bill in August.
Required: Prepare the adjusting entries.
Preparing Adjusting Entries

On November 30, 2013, the end of fiscal year, the following

information is available to you to prepare Edgar Detoya Company’s
adjusting entries:
a.The supplies account showed a beginning balance of P21,740. The
ending inventory revealed supplies on hand of P13,970.
b.The prepaid insurance account showed the following on November
30:
Beginning balance P35,800
July 1 42,0000
October 1 72,720
The beginning balance represented the unexpired portion of a one-
year policy purchased in September 2012. The July 1 entry
represented a new one year insurance policy and the October 1 is
additional coverage in the form of a three year policy.
c. The following table contains the cost and annual depreciation for
building and equipment, all of which Detoya Company purchased
before the current year.
Account Cost Annual Depreciation
Buildings P2,860,000 P145,000
Equipment 3,740,000 354,000
d. On September 1, the company completed negotiations with a client
and accepted an advance of P168,000 for services to be performed
next year. The P168,000 was credited to unearned services revenuees.
e. The company calculated that as of November 30, it had
earned P40,000 on an P110,000 contract that would be
completed and billed in January.
f. Among the liabilities of the company is a note payable in the
amount of P3,000,000. On November 30, accrued interest on
this note amounted to P150,000.
g. Assume that on, December 3, a Saturday, the company
which is on a six day workweek, will pay its regular salaried
employees P123,000
h. On November 29, the company completed negotiations and
signed a contract to provide services to a new client at an
annual rate of P175,000.
 Adjusting Entries and Accounting Policy
The following are some of the transactions made by Timoleon Lianza
Cleaners during 2023:
Apr 1. Acquired cleaning supplies in the amount of P260,000. A count
of the supplies on December 31, 2023 amounted to P100,000.
Aug 1. Received P360000 from Cebu Company for cleaning janitorial
uniforms over the next 3 years.
Nov 1. Paid P240,000 for annual rent.
dOffice Equipment was purchased on Mar 3 for P270,000. The
expected life of the equipment is 8 years.
Required:
1.Assume that Lianza records these transactions using the following
accounts, record he adjusting entries on Dec. 31, 2013
Office Suppies
Prepaid Rent
Unearned Cleaning Revenues

2. Now assume that Lianza records these transaction using the

following accounts, what will be the adjusting entries on Dec. 31,
2013?
Office Supplies Expense
Rent Expesne
Cleaning Revenues