Lesson 4-

Recording
2
Transactions in the
Journal
Objectives:
Familiarized oneself with the journal as a
book of account and know its uses
State and apply the rules of debit and
credit
Journalize transactions in the general
journal
 The
Journal
The Journal is a chronological record of
events or business transactions showing all
the effects of each transaction in terms of
debits and credits. Because transactions are
initially recorded in the journal, it is called
the book of original entry. The simplest
journal is the general journal.
A journal entry should contain the following:
1.Date

Write the month on the first transaction unless there is a

change in month for the succeeding transactions or a new
page is used.

2.Account Titles and Explanation

Write the debit account on the extreme left of the first

line and indent the credit account half-inch on the next
line.
3. P.R (Posting Reference)

Wite the corresponding account number here once the

entry is posted.

4. Debit

Under this column, write the debit amount for each debit
account.

5. Credit

Under this column, write the crebit amount for each crebit
account.
Presume that Gisel Ong established Anime World Gallery
with an initial investment of P300,000 on May 2, 2016. The
journal entry is shown

Date Account Titles and P.R Debit Credit

Explanation
2016

May 2 Cash 300,000

Ong, Capital 300,000

Initial Investment
The Simple and Compound
Entry
When only two accounts are affected, you call
this a simple entry where there is only one
debit account and one credit account. The
previous example where the owner, Gisel Ong,
made an initial investment is a simple entry. In
some cases, a transaction would require the
use of three or more accoounts, in which case
the entry is called a compound entry.
Journalizing the Transactions
Journalizing is the process of recording a
transaction in the journal after ithas been
recognized and measured.
Rules for Debit and Credit
You debit to show: You credit to show:
1. Decrease in assets
1.Increase in assets
2. Increase in liabilities
2.Decrease in
3. Increase in owners
liabilities equity
3.Decrease in owners - Initial investment
equity - Additional
- owners investment
withdrawal - Revenue/Income
The Analysis of a Transaction
1. From the business document, determine the kind of transaction
or exchange made.

2. Analyze the transaction to determine the accounts affected.

They can either affect the assets, liabilities, owners equity ,
revenue, or expenses account.

3. Determine the effect of the transaction on the account affected.

The transaction can either increase or decrease the accounts.

4. Apply the rules of debit and credit to identify whether the

accounts affected should be debited or credited to show the
corresponding increase or decrease.
Illustrative Problem
Initial
Investment
The following are transactions for Anime World Gallery for the month of
May. They will be recorded using the double-entry system. To analyze each
transaction, the following shall be used to show the effect on the accounts
as follows: A (for Asset), L (for Liability) or OE (for Owners Equity). The
effects on owners equity is sub classified as follows: OE:R (Revenue) and
OE:E (Expenses).

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 Anime characters of their choice. Thus, Gisel decided
to open Anime World Gallery. Gisel invested P300,000 in this initial
endeavor.
Analysis Assets increased. Owners equity increased.

Rules Debit increase in assets. Credit increases in owners

equity.

Entry Increase in assets is recorded by a debit to cash.

Increase in owners equity is recorded by a credit to Ong,
Capital.

Dr Cr

Cash (A)
Ong, Capital (OE) 300,000
Initial Investment 300,000
Issuance of Note for Cash
May 3 Gisel Ong issued a promissory note for a P100,000 loan from Allay
Bank. The note carriers a 12% interest per annum. The interest and the
principal are payable after one year.
Analysis Assets increased. Liabilities increased.

Rules Debit increase in assets. Credit increases in liabilities.

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) 100,000

Notes Payable ( L) 100,000
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 P180,000 in cash.
Analysis An asset increased. Another asset decreased.

Rules Debit increase in assets. Credit increases in assets.

Entry Increase in assets is recorded by a debit to office equipment.

Decrease in assets is recorded by a credit to cash.

Dr Cr

Office Equipment (A office equipment) 180,000

Cash (A) 180,000
Purchased office equipment for cash
Acquisition of Furniture Paying Down Payment and the
Balance on Account
May 5 Ms. Ong acquired furniture from Blooms costing P40,000, paying
P12,000 and the balance at the end of the month. (Note: A
compound entry is needed in this transaction.)
Analysis Asset increased. Asset decreased. Liabilities increased.

Rules Debit increase in assets. Credit decreases in assets. Credit

increases in liabilities

Entry Increase in assets is recorded by a debit to furniture & Fixture.

Decrease in assets is recorded by a credit to cash. Increase in liabilities is
recorded by a credit to accounts payable.
 Dr Cr

Furniture and Fixture (A) 40,000

Cash (A) 12,000
Accounts Payable (L) 28,000
Bought furniture by paying cash and
the balance on account
Advance Payment of Rental
May 6 Gisel Ong rented office space and pais two months rent in
advance, all costing P18,000
Analysis An asset increased. Another asset decreased.

Rules Debit increase in assets. Credit decreases in assets.

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) 18,000

Cash (A) 18,000
Paid two months rents in advance
Payment of Insurance Premiums
May 7 Ms. Ong paid Asia Insurance Co. P10,800 for one year insurance
of the gallery.
Analysis An asset increased. Another asset decreased.

Rules Debit increase in assets. Credit decreases in assets.

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) 10,800

Cash (A) 10,800
Paid one year insurance premium
Events not Affecting the Accounting Equation
(no journal entry)

May 7 Hired a part-time student helper with P4,000

monthly salary. The student helper started working
on the following day.

There is no entry necessary at this point as the

hiring of the student helper has no effect on the
assets, liabilities, and owners equity.
May 8 Called National Book Store and
ordered art supplies worth P7,200.

There is no entry necessary at this

point as the ordering of the art supplies
has no effect on the assets, liabilities,
and owners equity . No delivery of the
supplies has been made, theryby no
liability arises.
Purchase of Art Supplies on Account
May 8 The P7,200 worth of art supplies ordered from National Book
Store were delivered on account.
Analysis Asset increased. Liabilities increased.

Rules Debit increase in assets. Credit increases in liabilities.

Entry Increase in assets is recorded by a debit to art supplies.

Increase in liabilities is recorded by a credit to accounts payable.

Dr Cr

Art Supplies(A) 7,200

Accounts Payable (L) 7,200
Purchased art supplies on account
Income Earned on Account
May 11 An oil painting of Naruto and acrylic painting of L was delivered
to Mr. Ku To. Gisel Ong billed Mr. Ku To P120,000 for the paitings delivered.

Analysis An asset increased. Owners Equity increased.

Rules Debit increase in assets. Credit increases in owners equity.

Entry Increase in assets is recorded by a debit to accounts receivable.

Increase in owners equity is recorded by a credit to painting revenue.

Dr Cr

Accounts Receivable(A) 120,000

Painting Revenue (OE:R) 120,000
Anime painting on account
Partial Settlement of Accounts Payable
May 12 Ms. Ong paid National Book Store P3,000 of the amount owed.

Analysis Asset decreased. Liabilities decreased.

Rules Debit increase in assets. Credit decreases in assets.

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) 3,000

Cash (A) 3,000
Made partial payment to
National Book Store
Partial Collection of Accounts Receivable
May 15 Ms. Ong received P50,000 from Mr. Ku To as partial payment for
the anime painting deliverd last May 11.
Analysis Ann asset increased. Another asset decreased.

Rules Debit increase in assets. Credit decreases in assets.

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

in assets is recorded by a credit to accounts receivable.

Dr Cr

Cash (A) 50,000

Accounts Receivable (A) 50,000
Receive cash as partial collection
from Mr. Ku To
Cash Withdrawal by Owner for Personal
use 18 Gisel Ong withdrew P18,000 for personal use.
May

Analysis Asset decreased. Owners equitydecreased.

Rules Debit decrease in owners equity. Credit decreases in assets.

Entry Decrease in owners equity is recorded by a debit to Ong,

Drawing. Decrease in assets is recorded by a credit to cash.

Dr Cr

Ong, Drawing (OE) 18,000

Cash (A) 18,000
Withdrew cash for personal use
Cash Collection for Income Earned
May 23 Gisel Ong received cash from Ms. Uto San, P90,000, for a
charcoal poster of Kirito.
Analysis Asset increased. Owners Equity increased.

Rules Debit increase in assets. Credit increases in owners equity.

Entry Increase in assets is recorded by a debit to cash. Increase

in owners equity is recorded by a credit to painting revenue.

Dr Cr

Cash (A) 90,000

Painting Revenue(OE:R) 90,000
Received cash for charcoal painting
Payment of Salaries
May 25 Ms. Ong paid helpers salary for the month, P4,000.

Analysis Asset decreased. Owners Equity decreased.

Rules Debit decrease in owners equity. Credit decreases in assets.

Entry Decrease in owners 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) 4,000

Cash 4,000
Paid helpers salary for the month
Payment of Expenses Incurred/ Consumed
May 29 Gisel Ong paid water bill of P540 for the month.

Analysis Asset decreased. Owners Equity decreased.

Rules Debit decrease in owners equity. Credit increases in assets.

Entry Decrease in owners 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) 540

Cash (A) 540
Paid water bill for the month
Unpaid Expenses already Consumed / Incurred
(Accrued
May Expenses)
30 Ms. Ong received bill from Meralco amounting to P4,500.

Analysis Liabilities increased. Owners Equity decreased.

Rules Debit decrease in owners equity. Credit increases in liabilities.

Entry Decrease in owners equity is recorded by a debit to utilities

expense. Increase in liabilities recorded by a credit to utilities payable.

Dr Cr

Utilities Expense (OE:E) 4,500

Utilities Payable (L) 4,500
Receive bill from Meralco