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Darantan, KC T. - FAR Module 6

The document provides instructions and examples for identifying accounts affected and the effects on those accounts for various business transactions. It then lists 15 transactions and asks the reader to identify the accounts affected and effects for each one.

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Li Li
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127 views

Darantan, KC T. - FAR Module 6

The document provides instructions and examples for identifying accounts affected and the effects on those accounts for various business transactions. It then lists 15 transactions and asks the reader to identify the accounts affected and effects for each one.

Uploaded by

Li Li
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Application

Instructions: Identify the accounts that are affected by the transactions described below and the
effects on the accounts.

Transactions Accounts Effects


Example: Payment of advertising Advertising expense Increase
expense Cash decrease
1. Owner’s contribution to the Cash Increase
business Owner’s Capital Increase
2. Hired 2 employees None None
None None
3. Purchase of inventory for cash Inventory Increase
Cash Decrease
4. Sale on cash basis and the charging Cash Increase
of the cost of goods sold as expense Sales Increase
Cost of Sales Increase
Inventory Decrease
5. Purchase of equipment for cash Equipment Increase
Cash Decrease
6. Obtaining a loan Cash Increase
Notes Payable Increase
7. Owner’s withdrawals from the Owner’s Drawings Increase
business Cash Decrease
8. Sale on cash basis and the charging Cash Increase
of the cost of goods sold as expense Sales Increase
Cost of Sales Increase
Inventory Decrease
9. Payment of interest expense Interest Expense Increase
Cash Decrease
10. Collection of accounts receivable Cash Increase
Accounts Receivable Decrease
11. Purchase of inventory on account Inventory Increase
Accounts Payable Increase
12. Payment of accounts payable Accounts Payable Decrease
Cash Decrease
13. Payment of salaries expense Salaries Expense Increase
Cash Decrease
14. Payment of loan in number 6 Notes Payable Decrease
Cash Decrease
15. Plan to purchase delivery truck None None
None None
Feedback

JOURNAL ENTRIES

Instruction: Provide the journal entries to record the transactions described below.

Problem 1:
1. The business owner contributes P100,000 cash to the business.
Answer: Cash 100,000
Owner’s Capital 100,000

2. The business obtains a loan of P800,000.


Answer: Cash 800,000
Notes payable 800,000

3. The business purchases equipment for P200,000 cash.


Answer: Equipment 200,000
Cash 200,000

4. The business purchases goods worth P500,000 on cash basis.


Answer: Inventory 500,000
Cash 500,000

5. The business sells goods costing P50,000 for P120,000 on cash basis.
Answer: Cash 120,000
Sales 120,000

Cost of Sales 50,000


Inventory 50,000

6. The business pays advanced rent amounting to P60,000.


Answer: Prepaid Rent 60,000
Cash 60,000

7. The business pays half of the loan in #2 above.


Answer: Notes payable 400,000
Cash 400,000

8. The business pays interest expense of P80,000.


Answer: Interest expense 80,000
Cash 80,000

9. The business pays utilities expense of P10,000.


Answer: Utilities expense 10,000
Cash 10,000
10. The business pays salaries expense of P32,000.
Answer: Salaries expense 32,000
Cash 32,000

Problem 2:
1. Owner invests P1,000,000 cash to the business.
Cash 1,000,000
Owner’s Capital 1,000,000

2. Payment of P30,000 for business permit.


Taxes and licenses expense 30,000
Cash 30,000

3. Payment of P200,000 for a TV commercial to promote the business' products.


Advertising expense 200,000
Cash 200,000

4. Purchase of inventory worth P600,000 on account


Inventory 600,000
Accounts Payable 600,000

5. Sale of goods for P800,000, on account. The cost of the goods sold is P500,000.
Accounts receivable 800,000
Sales 800,000

Cost of Sales 500,000


Inventory 500,000

6. Collection of P700,000 on accounts receivable.


Cash 700,000
Accounts receivable 700,000

7. Payment of P300,000 accounts payable.


Accounts payable 300,000
Cash 300,000

8. Payment of P70,000 for rent expense.


Rent expense 70,000
Cash 70,000

9. Payment of P8,000 for utilities expense.


Utilities expense 8,000
Cash 8,000

10. Owner withdraws P20,000 cash from the business


Owner’s Drawings 20,000
Cash 20,000

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