MPE, Masters in Proforma Entries

If you are a master in proforma entries, you do not have to worry in preparing journal entries for your quiz or exam on your accounting subject.

Here is an example:

August 1, Owner invested cash in the business.

                                                            DR                   CR

Cash                                                    xxx
            Capital                                                             xxx

This entry is recorded whenever the owner of the business invests cash in the business.  Going back to our discussion on the normal balances of the account, we should remember the techniques.

Here are the simple steps in journalizing:

1) Determine the accounts to be affected.  On this case, CASH and CAPITAL 

2) Determine if the accounts are increased or decreased.  CASH and CAPITAL are increased

3) Lastly, determine whether to debit or to credit using the following rules on debit and credit.

For:

Asset accounts, Withdrawals and Expenses, increase is on the debit side.  These accounts decrease on the credit side.

Liabilities, Equity accounts and Revenues, increase is on the credit side.  These accounts increase on the debit side.

CASH is an asset account, so we debited it while CAPITAL is an equity account so we credited it.

Let us then have the other proforma entries

August 2, Bought supplies on account

Using the steps:

1) SUPPLIES and ACCOUNTS PAYABLE

2) SUPPLIES account is increased and ACCOUNTS PAYABLE is increased.

3) SUPPLIES is an ASSET account – DEBIT and ACCOUNTS PAYABLE is a LIABILITY – CREDIT

                                                            DR                CR

Supplies                                              xxx
            Accounts Payable                                           xxx

August 3 Bought an equipment amounting to P30,000, made a downpayment of P10,000 and the balance on account

For this example, we can see that an asset is acquired partly in cash and on account.  Let’s use the steps we have already considered from the previous example.

1. EQUIPMENT, CASH and ACCOUNTS PAYABLE

2. EQUIPMENT- increase, CASH – decrease, ACCOUNTS PAYABLE-increase

3. EQUIPMENT-ASSET increase-debit, CASH-ASSET decrease-credit, ACCOUNTS PAYABLE-LIABILITY-increase - Credit

                                                DR           CR

Equipment                             30,000

            Cash                                          10,000

            Accounts Payable                       20,000

We try to show here the amounts for us to determine what portion of liability has been already paid off.  Accounting for this kind of transaction requires extra care since errors often arise in the wrong pick up of figures now that we have a compound entry.

August 30 Billed the client for the services rendered

Proforma entry will be:

                                                DR           CR

Accounts Receivable                 xxx

            Service Revenue                           xxx

The word that you must take into account here is the word “billed”. 

No payment has been made by the client but we have already provided the service.  Accordingly, we have to record the asset which is the accounts receivable.  This is the amount owed to us by our client.

Meanwhile, service revenue, pertains to the amount of the service we provided to the client. 

August 30 Paid the salaries of the employees for the month

                                                DR           CR

Salary Expense                         xxx

            Cash                                            xxx

The highlighted word “paid” pertains to the decrease in cash balance as a result of payment to the employees.  The salary paid is an expense of the Company on its operations. Expenses’ normal balance is debit.  Cash is an ASSET, which is obviously decreased, that’s why we credited it.

That’s all for now.  These are only some of the common proforma entries that is being given during examination in accounting.  I hope this could be of help somehow to you.  Thank you for reading! Till next time!