Directions: Provide an analysis for each transaction below then make a journal entry afterward. Example: x. Rendered catering services on account, P28,240. Analysis: Assets increased. Owner’s Equity increased. Questions Activity Tanauan Institute, Inc. – Senior High School Department Subject: Fundamentals of ABM 1 Topic: Journalizing Session: 8-9 Page | 9 Rule: Increases in assets are recorded as debits. Increases in owner’s equity is recorded are credits. Entry: Increases in assets is recorded as debit to cash. Increase in owner’s equity is recorded is recorded as credit to service income. Journal Entry: Dr. Cr. x. Cash 28,240 Service Income 28,240 a. Labausa deposited P165,000 in a bank account in the name of the business. b. Bought a service vehicle from Elpidio Motors for P194,900, paying P25,000 in cash and placing the balance on account. c. Bought catering equipment on account from Quirino Equipment, P28,500. d. Paid rent for the month, P6,200. e. Rendered catering services for cash for the first half of the month, P24,200. f. Bought supplies for cash, P1,800. g. Bought insurance for the service vehicle for one year, P4,000. h. Received and paid the utilities bill, P6,040. i. Received a bill from Manila Gas for gas and oil used by the service vehicle for the month, P6,080. j. Rendered catering services on account, P28,240. k. Performed catering services for cash for the remainder of the month, P25,200. l. Paid salaries of the part-time assistants, P11,200. m. Labausa withdrew cash for personal use, P15,500.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Directions: Provide an analysis for each transaction below then make a
journal entry afterward.
Example: x. Rendered catering services on account, P28,240.
Analysis: Assets increased. Owner’s Equity increased.
Questions
Activity
Tanauan Institute, Inc. – Senior High School Department
Subject: Fundamentals of ABM 1 Topic: Journalizing Session: 8-9 Page | 9
Rule: Increases in assets are recorded as debits. Increases in owner’s equity is
recorded are credits.
Entry: Increases in assets is recorded as debit to cash. Increase in owner’s
equity is recorded is recorded as credit to service income.
Journal Entry: Dr. Cr.
x. Cash 28,240
Service Income 28,240
a. Labausa deposited P165,000 in a bank account in the name of the business.
b. Bought a service vehicle from Elpidio Motors for P194,900, paying P25,000 in cash and placing the balance on account.
c. Bought catering equipment on account from Quirino Equipment, P28,500.
d. Paid rent for the month, P6,200.
e. Rendered catering services for cash for the first half of the month, P24,200.
f. Bought supplies for cash, P1,800.
g. Bought insurance for the service vehicle for one year, P4,000.
h. Received and paid the utilities bill, P6,040.
i. Received a bill from Manila Gas for gas and oil used by the service vehicle for the month, P6,080. j. Rendered catering services on account, P28,240.
k. Performed catering services for cash for the remainder of the month, P25,200.
l. Paid salaries of the part-time assistants, P11,200.
m. Labausa withdrew cash for personal use, P15,500.
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