T Accounts, Journal Entry and Trial Balance Exercise
Q: Juan de la Cruz began professional practice as a system analyst on July 1. He plans to prepare a monthly financial statement. During July, the owner completed these transactions (PHP = Philippine Peso, currency of Philippines):
July 1. Owner invested PHp 500,000 cash along with computer equipment that had a market value of php. 120,000 two years ago but was now worth Php. 100,000 only. July 2. Paid php. 15,000 cash for the rent of office space for the month. July 4. Purchased php. 12,000 of additional equipment on credit (due within 30 days). July 8. Completed awork for a client and immediately collected the php. 32,000 cash. July 10. Completed work for a client and sent a bill for php. 27,000 to be paid within 30 days. July 12. Purchased additional equipment for php. 8,000 in cash. July 15. Paid an assistant php. 6,200 cash as wages for 15 days. July 18. Collected php. 15,000 on the amount owed by the client. July 25. Paid php. 12,000 cash to settle the liability on the equipment purchased. July 28. Owner withdrew php. 500 cash for personal use. July 30. Completed work for another client who paid only php. 40,000 for 50% of the system design. July 31. Paid salary of assistant php. 700. July 31. Received PLDT bill, php. 1,800 and Meralco bill php. 3,800.
Required: Prepare the journal entries, T accounts and trial balance for this business.
A: This is a really good question to practice.
Journal entries for the above transactions: July 1 Dr Cash 500,000 Dr Computer Eqpt 100,000 Cr Capital 600,000 Owner started business with cash and computer Eqpt.
2 Dr Rent Exp 15,000 Cr Cash 15,000 Paid rent of office for the month of July.
4 Dr Equipment 12,000 Cr Creditors 12,000 Equipment purchased for business use.
8 Dr Cash 32,000 Cr Services rendered (income) 32,000 Services rendered for a client.
10 Dr Debtors 27,000 Cr Services rendered (income) 27,000 Services rendered for a client.
12 Dr Equipment 8,000 Cr Cash 8,000 Additional equipment purchased.
15 Dr Salaries & Wages 6,200 Cr Cash 6,200 Paid wages to assistant for 15 days.
18 Dr Cash 15,000 Cr Debtors 15,000 Received cash from debtor.
25 Dr Creditors 12,000 Cr Cash 12,000 Creditors of Eqpt purchased, settled.
28 Dr Drawings 500 Cr Cash 500 Owner withdrew cash for personal use.
30 Dr Cash 40,000 Dr. Debtors 40,000 Cr Services rendered (income) 80,000 50% amount received by a client on a/o work completed.
31 Dr Salaries & Wages 700 Cr Cash 700 Paid salary to the assistant.
31 Dr Utilities Exp (PLDT) 1,800 Dr Utilities Exp (Meralco) 3,800 Cr Creditors 5,600 PLDT and Meralco have been assumed to be the utility companies.
Note: In this example we have combined salaries and wages into one account, but sometimes in real life these are kept separate - one account for wages and another account for salaries.
Hope you enjoyed the solutions we provided here for this exercise on journals, T-accounts and the trial balance!
Feel free to check out the lessons on each of the topics covered in this exercise: