Accounting Equation II
Listed below are ten (10) business transactions for Puring Company during its first month of
operations:
a. Owner invested cash in the business amounting to P300,000
b. Purchased equipment for cash amounting to P50,000
c. Purchased inventories through credit amounting to P35,000
d. Purchased furniture amounting to P30,000. Made partial payment with cash (P10,000)
and incurred an accounts payable for the balance (P20,000)
e. Paid cash to the local government for business permit (P9,000)
f. Made sales of P17,000 (P12,000 cash sales, P5,000 credit sales)
g. The cost of the sales made in (f) amounted to P8,500
h. Paid the accounts payable in (d)
i. Collected P2,500 out of the P5,000 credit sales in (f)
j. Paid employees P12,000
Give the corresponding journal entry of each transaction and indicate the effects of the given
transactions on each of the financial statement elements in the table shown below. The answer
for transaction (a) is given as an example:
(A) CASH 300,000
OWNER’S CAPITAL, 300,000
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ASSETS = LIABILITIES + EQUITY REVENUE EXPENSES
(A) P300,000 P300,000
B. Purchased equipment for cash amounting to P50,000
(B) EQUIPMENT 50,000
CASH 50,000
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ASSETS = LIABILITIES + EQUITY REVENUE EXPENSES
(B) P50,000
(P50,000)
C. Purchased inventories through credit amounting to P35,000
(C) INVENTORIES 35,000
ACCOUNTS PAYABLE 35,000
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ASSETS = LIABILITIES + EQUITY REVENUE EXPENSES
(C) P35,000 P35,000
D. Purchased furniture amounting to P30,000. Made partial payment with cash (P10,000)
(D) FURNITURE 30,000
CASH 10,000
ACCOUNTS PAYABLE 20,000
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ASSETS = LIABILITIES + EQUITY REVENUE EXPENSES
(D) P30,000 P20,000
(P10,000)
E. Paid cash to the local government for business permit (P9,000)
(E) BUSINESS PERMIT EXPENSE 9,000
CASH 9,000
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ASSETS = LIABILITIES + EQUITY REVENUE EXPENSES
(E) (P9,000) P9,000
F. Made sales of P17,000 (P12,000 cash sales, P5,000 credit sales)
(F) CASH 12,000
ACCOUNTS RECEIVABLE 5,000
SALES 17,000
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ASSETS = LIABILITIES + EQUITY REVENUE EXPENSES
(F) P12,000 P17,000
P 5,000
(G) The cost of the sales made in (f) amounted to P8,500
(G) COST OF GOODS SOLD 8,500
INVENTORY 8,500
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ASSETS = LIABILITIES + EQUITY REVENUE EXPENSES
(G) (P8,500) 8,500
H. Paid the accounts payable in (d)
(H) ACCOUNTS PAYABLE 20,000
CASH 20,000
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ASSETS = LIABILITIES + EQUITY REVENUE EXPENSES
(H) (P20,000) (P20,000)
I. Collected P2,500 out of the P5,000 credit sales in (f)
(I) CASH 2,500
ACCOUNTS RECEIVABLE 2,500
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ASSETS = LIABILITIES + EQUITY REVENUE EXPENSES
(I) P2,500
(P2,500)
J. Paid employees P12,000
(J) SALARIES EXPENSE 12,000
CASH 12,000
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ASSETS = LIABILITIES + EQUITY REVENUE EXPENSES
(J) (P12,000) 12,000
