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    Accounting For Business Transactions

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    Akp Wewen Gensaya
    The document discusses accounting for various business transactions of Del Mundo Graphics Design for the month of March 2015: 1) Del Mundo deposited cash into the business bank account, increasing assets and owner's equity. 2) The business acquired computer equipment using cash, decreasing cash but increasing another asset. 3) Computer supplies were purchased on credit, increasing assets and liabilities. 4) Cash was collected from clients for services, increasing assets and owner's equity. 5) Expenses were paid in cash, decreasing assets and owner's equity.

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    Accounting For Business Transactions

    Uploaded by

    Akp Wewen Gensaya
    430 views13 pages
    The document discusses accounting for various business transactions of Del Mundo Graphics Design for the month of March 2015: 1) Del Mundo deposited cash into the business bank account, increasing assets and owner's equity. 2) The business acquired computer equipment using cash, decreasing cash but increasing another asset. 3) Computer supplies were purchased on credit, increasing assets and liabilities. 4) Cash was collected from clients for services, increasing assets and owner's equity. 5) Expenses were paid in cash, decreasing assets and owner's equity.

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    ACCOUNTING FOR BUSINESS TRANSACTIONS

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    The document discusses accounting for various business transactions of Del Mundo Graphics Design for the month of March 2015: 1) Del Mundo deposited cash into the business bank account, increasing assets and owner's equity. 2) The business acquired computer equipment using cash, decreasing cash but increasing another asset. 3) Computer supplies were purchased on credit, increasing assets and liabilities. 4) Cash was collected from clients for services, increasing assets and owner's equity. 5) Expenses were paid in cash, decreasing assets and owner's equity.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    430 views13 pages

    Accounting For Business Transactions

    Uploaded by

    Akp Wewen Gensaya
    The document discusses accounting for various business transactions of Del Mundo Graphics Design for the month of March 2015: 1) Del Mundo deposited cash into the business bank account, increasing assets and owner's equity. 2) The business acquired computer equipment using cash, decreasing cash but increasing another asset. 3) Computer supplies were purchased on credit, increasing assets and liabilities. 4) Cash was collected from clients for services, increasing assets and owner's equity. 5) Expenses were paid in cash, decreasing assets and owner's equity.

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    ACCOUNTING FOR BUSINESS TRANSACTIONS

    Accounting observe many events that they identify and


    measure in financial terms. A business transaction is the
    occurrence of an event or a condition that affects
    financial position and can be reliably recorded.
    Mar. 1 Del Mundo started his new business by depositing P350,000 in a bank
    account in the name of Del Mundo Graphics Design at BPI Poblacion
    Branch.

    Del Mundo Graphics Design


    Financial Transaction Worksheet
    Month of March 2015

    Assets = Liabilities + Owner’sEquity

    Cash = Del Mundo,


    Capital

    (1) P350,000 = P350,000


    The financial transaction is analyzed as follows:

    • An entity separate and distinct from Del Mundo’s personal


    financial affairs is created.
    • An economic resource—cash of P350,000 is invested in the
    business entity. The source of this asset is the contribution
    made by the owner, which represents owners’ equity. The
    owner’s equity account is Del Mundo, capital.
    • The dual nature of the transaction is that cash is invested and
    owner’s equity created. The effects on the accounting
    equation are as follows: increase in asset—cash from zero to
    P350,000 and increase in owner’s equity from zero to
    P350,000.
    • At this point, the entity has no liabilities, and assets equal
    owner’s equity.
    Mar. 5 Computer equipment costing P145,000 is acquired on cash basis. The
    effect of the transaction on the basic equation is:

    Assets = Liabilities + Owner’s


    Equity

    Cash + Computer = Del Mundo,


    Equipment Capital

    Bal. P350,000 = P350,000


    (5) (145,000) P145,000 = ____________
    Bal. P205,000 + P145,000 = P350,000
    P350,000 = P350,000

    This transaction did not change the total assets but it did change the composition
    of the assets—it decrease one asset—cash and increased another asset—computer
    equipment by P145,000. note that the sums of the balances on both sides of the
    equation are equal. This equality must always exist.
    Mar. 9 Computer supplies in the amount of P25,000 are purchased on account.

    Assets = Liabilities + Owner’s Equity

    Cash + Computer + Computer = Accounts + Del Mundo,


    Supplies Equipment Payable Capital

    Bal.P205,000 P145,000 = P350,000


    (9) ________ P25,000 __________ = P25,000 ___________
    Bal.P205,000 + P25,000 + P145,000 = P25,000 + P350,000
    P375,000 = P375,000

    Assets don’t have to be purchased in cash. It can also be purchased on credit.


    Acquiring the computer supplies with a promise to pay the amount due later is called
    buying on account. This transaction increases both the assets and the liabilities of the
    business. The asset affected is computer supplies and the liability crated is an accounts
    payable.
    Mar. 11 Del Mundo Graphics Design collected P88,000 in cash for designing
    interactive web sites for two exporters based inside the Ortigas Ecozone.

    Assets = Liabilities + Owner’s Equity

    Cash + Computer + Computer = Accounts + Del Mundo,


    Supplies Equipment Payable Capital

    Bal.P205,000 P25,000 P145,000 = P25,000 P350,000


    (11) 88,000 ___________ __________ = _________ 88.000
    Bal.P293,000 + P25,000 + P145,000 = P25,000 + P438,000
    P463,000 = P463,000

    The entity earned service income by designing web sites for clients. Del Mundo
    rendered his professional services and collected revenues in cash. The effect on the
    accounting equation is the increase in the asset—cash and an increase in owner’s
    equity. Income increases owner’s equity. This transaction caused the business to grow,
    as shown by the increase in total assets from P375,000 to P463,000.
    Mar. 16 Del Mundo paid P18,000 to Ceradoy Bills Express, a one-stop bills
    payment service company, for the semi-monthly utilities.

    Assets = Liabilities + Owner’s Equity

    Cash + Computer + Computer = Accounts + Del Mundo,


    Supplies Equipment Payable Capital

    Bal.P293,000 P25,000 P145,000 = P25,000 P438,000


    (16) (18,000) ___________ __________ = _________ (18.000)
    Bal.P275,000 + P25,000 + P145,000 = P25,000 + P420,000
    P445,000 = P445,000

    Expenses are recorded when they are incurred. Expenses can be paid in cash when
    they occur, or they can paid later. The payment for utilities is an expanse for the month
    of March. It represented an outflow of resources and a reduction of owner’s equity.
    Expenses have the opposite effect of income; they cause the business to shrink as
    shown by the smaller amount of total asset of P445,000.
    Mar. 17 The entity has service agreements with several Entpreneurs to maintain
    and update their web sites weekly. Del Mundo billed these clients
    P35,000 fro services already rendered during the month.

    A = L + OE

    Cash + Accounts + Computer + Computer = Accounts + Del


    Receivable Supplies Equipment Payable Mundo
    Capital

    Bal. P275,000 P25,000 P145,000 = P25,000 P420,000


    (17)__________ 35,000 35,000
    Bal. P275,000 + P35,000 + P25,000 + P145,000 = P25,000 + P455,000
    P480,000 = P480,000

    The entity has performed services to clients so income should already be


    recognized. Del Mundo is entitled to receive payment for these but the clients did
    not pay immediately. Performing the services creates an economic resource, the
    clients’ promise to pay the amount which is called accounts receivable. This
    transaction resulted to an increase in an asset—accounts receivable and an increase
    in owner’s equity of P35,000.
    Mar. 19 Del Mundo made a partial payment of P17,000 for the Mar. 9 purchased
    on account.

    A = L + OE

    Cash + Accounts + Computer + Computer = Accounts + Del


    Receivable Supplies Equipment Payable Mundo
    Capital

    Bal. P275,000 P35,000 P25,000 P145,000 = P25,000 P455,000


    (19) (17,000) ____________ ___________ __________ = (17,000) _______
    Bal. P258,000 + P35,000 + P25,000 + P145,000 = P8,000 + P455,000
    P463,000 = P463,000

    This transaction is a payment on account. The effect on the accounting equation is a


    decrease in the asset---cash and a decrease in the liability—accounts payable. The
    payment of cash on account has no effect on the asset—computer supplies because
    the payment does not increase or decrease the supplies available to the business.
    Mar. 20 Checks totaling P25,000 were receive from clients for billing dated Mar.
    17.

    A = L + OE

    Cash + Accounts + Computer + Computer = Accounts + Del


    Receivable Supplies Equipment Payable Mundo
    Capital

    Bal. P258,000 P35,000 P25,000 P145,000 = P25,000 P455,000


    (20) 25,000 _ (25,000)_____ ___________ __________ = ______ _______
    Bal. P283,000+ P10,000 + P25,000 + P145,000 = P8,000 + P455,000
    P463,000 = P463,000

    Last Mar. 17, Del Mundo billed clients for services already rendered. On Mar. 20, the
    entity was able to collect P25,000 from them. The asset—cash is increased by
    P25,000. the business should not record service income on Mar. 20 since it has
    already recorded the income last Mar. 17. Total assets are unchanged. The business
    merely reduced one asset—accounts receivable and increase another—cash.
    Mar. 21 Del Mundo withdrew P20,000 from the business for his personal use.

    A = L + OE

    Cash + Accounts + Computer + Computer = Accounts + Del


    Receivable Supplies Equipment Payable Mundo
    Capital

    Bal. P283,000 P10,000 P25,000 P145,000 = P8,000 P455,000


    (21) (20,000) ____________ ___________ __________ = ________ (20,000)
    Bal. P263,000 + P10,000 + P25,000 + P145,000 = P8,000 + P435,000
    P443,000 = P443,000

    Withdrawal of cash or another assets for personal use is the way by which the
    owner of the entity receives advance distribution of the profits. On Mar. 1, Del
    Mundo invested P350,000; both cash and owner’s equity increased. The transaction
    was an investment by the owner and not an income-generating activity. Del Mundo
    simply transferred funds from his personal account to the business. A cash
    withdrawal is exactly the opposite. The P20,000 cash withdrawal transaction
    resulted to a reduction in both cash and owner’s equity.
    Mar. 27 Warlito Blanche Publishing submitted a bill to Del Mundo for P8,000
    worth of news paper advertisements for this month . Del Mundo will pay
    this bill next month.
    A = L + OE

    Cash + Accounts + Computer + Computer = Accounts + Del


    Receivable Supplies Equipment Payable Mundo
    Capital

    Bal. P263,000 P10,000 P25,000 P145,000 = P8,000 P435,000


    (27) _________ ___________ __________ _________ = 8,000 (8,000)
    Bal. P263,000 + P10,000 + P25,000 + P145,000 = P16,000 + P427,000
    P443,000 = P443,000

    Warlito Blanche rendered services on account. Del Mundo Graphics Design has
    incurred an expense in the amount of P8,000 by availing of Warlito Blanche’s
    services. There was no payment during the month. This advertising expense resulted
    to a decrease in owner’s equity and an increase in the liability—accounts payable.
    Mar. 31 Del Mundo paid his assistant designer salaries of P15,000 for the month.
    A = L + OE

    Cash + Accounts + Computer + Computer = Accounts + Del


    Receivable Supplies Equipment Payable Mundo
    Capital

    Bal. P263,000 P10,000 P25,000 P145,000 = P16,000 P427,000


    (31 (15,000) ___________ __________ _________ = __________ (15,000)
    Bal.P248,000 + P10,000 + P25,000 + P145,000 = P16,000 + P412,000
    P428,000 = P428,000

    This transaction resulted to a reduction in owner’s equity as well as a reduction in


    cash. By providing his services to Del Mundo for the month, the assistant designer
    has created for the business an expense—salaries expense.

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