Chapter 5: Double Entry Bookkeeping for a Service Provider Flashcards
First Step of the Accounting Cycle
Collecting data based on various documents or business reports.
Second Step of the Accounting Cycle
Analyzing and RECORDING the documents in a book called the JOURNAL.
Third Step of the Accounting Cycle
Classifying and POSTING from the journal to another book called LEDGER.
Fourth Step of the Accounting Cycle
Extracting the balances of each of the accounts found in the ledger and PREPARING a TRIAL BALANCE.
Source documents evidencing transactions of a business.
Business Papers
Issued when service or merchandise is given to a customer or client.
Invoice
Issued when cash is received by the entity.
Official Receipt
A document used when cash is paid or a check is issued.
Check Voucher
Negotiable instrument used as a substitute for cash, the payment for which is drawn against the entity’s or individual’s current account.
Check
Written promise to pay a certain sum of money at a future date.
Promissory Note
A bill presented to a customer for service rendered or merchandise given for which payment is demandable.
Statement of Account
This is a device used to record the increases and decreases affecting each of the different assets, liabilities and owner’s equity.
Account
A listing of account titles that guides the bookkeeper in the recording of the transactions.
Chart of Accounts
The number and the nature of accounts depend on the type of ———.
Business Operation
The accounts in chart of accounts are properly arranged with the —— listed first, followed by the —— and lastly by the ——.
- Assets
- Liabilities
- Owner’s Equity
Assigned for each account for easy reference.
Account numbers
This is the simplest tool used to analyze the effects of the transactions on each account.
T Account
The left part of the T Account is called
Debit Side
The right part of the T Account is called
Credit Side
It is placed on the top of T Account.
Title of Account
Increases in Assets are recorded on the —— of the account, while Decreases in Assets are recorded on the —— of the account.
- Debit Side (Left of T Account)
- Credit Side (Right of T Account)
Increase in Liabilities are recorded on the —— of the account, while Decreases in Liabilities are recorded on the —— of the account.
- Credit Side (Right of T Account)
- Debit Side (Left of T Account)
Increases in Owner’s Equity are recorded on the —— of the account, while Decreases in Owner’s Equity are recorded on the ——.
- Credit Side (Right of T Account)
- Debit Side (Left of T Account)
ENTRY: March 1, May Gomez opened a tour and travel service business by investing cash of P50,000 and two cars worth P750,000.
Debit: Cash P50,000
Debit: Car P750,000
Credit: Gomez, Capital P800,000
ENTRY: March 3, Borrowed P100,000 from Citibank for business use.
Debit: Cash P100,000
Credit: Loans Payable P100,000
ENTRY: March 7, Bought tables and chairs from Blim’s. Paid cash of P45,000.
Debit: Furniture & Fixtures P45,000
Credit: Cash P45,000
ENTRY: March 10, Purchased from National Winner two aircon units for P50,000 and an electric fan for P5,000, all on account.
Debit: Equipment P55,000
Credit: Accounts Payable P55,000
ENTRY: March 18, Gomez made a cash withdrawal of P5,000 for personal use.
Debit: Gomez, Drawing P5,000
Credit: Cash P5,000
ENTRY: March 20, Paid the account due to National Winner.
Debit: Accounts Payable P55,000
Credit: Cash P55,000
ENTRY: March 21, P15,000 was received from a tourist for a tour package for three persons in Baguio.
Debit: Cash P15,000
Credit: Service Income P15,000
ENTRY: March 22, Paid for gas and oil P500 and repair of car P1,000.
Debit: Gas & Oil Expense P500
Debit: Repair Expense P1,000
Credit: Cash P1,500
ENTRY: March 22, Paid for gas and oil P500 and repair of car P1,000.
Debit: Gas & Oil Expense P500
Debit: Repair Expense P1,000
Credit: Cash P1,500
ENTRY: March 24, Mr. Gray hired the services of the agency for his visitors and promised to pay P16,000 on March 31.
Debit: Accounts Receivable P16,000
Credit: Service Income P16,000
ENTRY: March 25, Paid PLDT for telephone service, P500.
Debit: Utilities Expense P500
Credit: Cash P500
ENTRY: March 27, Billed Angelicum Faculty Club P20,000 for a tour of Metro Manila.
Debit: Accounts Receivable P20,000
Credit: Service Income P20,000
ENTRY: March 30, Collected P8,000 from the customer, Mr. Gray.
Debit: Cash P8,000
Credit: Accounts Receivable P8,000
ENTRY: March 31, Paid for office rent P10,000 and salaries of workers P9,000.
Debit: Rent Expense P10,000
Debit: Salaries Expense P9,000
Credit: Cash P19,000
Every transaction entry must have a debit equal to a credit no matter how many accounts are affected. This is called
Double Entry Bookkeeping System or Venetian Model by Luca Pacioli
The transactions must always affect two —— (Ex. Cash and Capital) and at least one or two —— (Ex. Assets only or assets and Owner’s Equity)
- Accounts
- Accounting Elements
The difference between the debit total and the credit total is called an
Account Balance
If the debit total is higher than the credit total the account balance is called a
Debit Balance
If the credit total is higher than the debit total the account balance is called a
Credit Balance
Used by accountants to analyze transactions and immediately determine balances of accounts.
T Account
