Fabm1 Module 5
Fabm1 Module 5
Fundamentals of
Accountancy, Business and
Management 1
Module 5
Books of Accounts
Good Job! Thank you for completing Module 4. You are now ready for
the next lesson which is the Books of Accounts. You need to learn more
effectively. Good luck!
Module Content
Learning is fun! So enjoy your journey as you unfold the most interesting and
worthwhile activities in accounting.
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What Is It
The two major types of books of accounts are the Journal and Ledger.
1. JOURNAL
There are two types of journals, the General Journal and the Special Journal.
A. GENERAL JOURNAL
The general journal is the most basic journal. Typically, a general journal
has spaces for dates, account titles and explanations, references, and two
amount columns. The journal makes several significant contributions to the
recording process:
- It discloses in one place the complete effects of a transaction.
- It provides a chronological record of transactions.
- It helps to prevent or locate errors because the debit and credit
amounts for each entry can be easily compared.
b. A brief explanation of the transaction which appears on the line below the
credit account title. A space is left between journal entries. The blank
space separates individual journal entries and makes the entire journal
easier to read.
c. The column titled P.R (which stands for Post Reference) which is left
blank when the journal entry is made. This column is used later when the
journal entries are transferred to the ledger accounts.
d. The Debit Account title which is entered first at the extreme left margin of
the column headed “Account Titles and Explanation,” and the
amount of the debit is recorded in the Debit column.
e. The Credit Account title which is indented and entered on the next line in
the column headed “Account Titles and Explanation,” and the amount of
the credit is recorded in the Credit column.
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A journal entry should contain the Date, Account Titles and
Explanation, Posting Reference, Debit, and Credit. Below is a sample of a
General Journal.
August 21, 2020 Mr. J Pacs invested PHP500, 000 in a coffee shop business.
August 30, 2020 purchased equipment for his business amounting to
PHP100, 000 by cash.
September 6, 2020 started his operations and made a sales for that
day amounting to PHP20, 000.
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On December 25, 2020, Mr. J Pacs purchased furniture costing PHP80, 000.
He pays PHP30, 000 cash and agrees to pay the remaining PHP50,000 on
account . The compound entry is as follows:
B. SPECIAL JOURNALS
Take the case of our example above, if Mr. J Pacs will record the sales per
day using the Official Receipt or Cash Sales Invoice issued, it would be
unnecessary and impractical to credit “sales” account repeatedly. In order to
facilitate efficient and practical recording of similar and recurring transactions, a
Special Journal is used.
a. Cash Receipts Journal – used to record all cash that has been
received. The cash receipts journal is used to record transaction involving
receipt or collection of cash. The source document for this journal is
the Official Receipts or Cash receipts issued by the business. The following
illustrate the format of a cash receipts journal:
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Major categories of receipts, such as cash sales and collection of
accounts receivable are provided with separate columns.
These transactions are frequent and repetitive items, therefore
a separate column is provided.
The column sundry is used for various miscellaneous and less
regular items, such as capital investment, receipt of loan proceeds,
among others.
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c. Sales Journal (Sales on Account Journal) – used to record all sales on
credit (on account). The Sales Journal or Sales on Account Journal is
used in recording several sales transactions on account. The source
document
for this journal is the charge invoice or sales invoice to various customers
or clients. The following illustrate the format of a Sales Journal:
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d. Purchase Journal (Purchase on Account Journal) – used to record all
purchases of inventory on credit (or on account). The Purchase journal or
the
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Purchases on Account Journal is used to record recurring transactions of
purchases on account. The source documents for purchase journal are the
invoices from the supplier of the company. The following illustrate the
format of a Purchase Journal:
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2. LEDGER
The ledger refers to the accounting book in which the accounts and their related
amounts as recorded in the journal are posted periodically. The ledger is also called
the „book of final entry‟ because all the balances in the ledger are used in the
preparation of financial statements. This is also referred to as the T-Account
because the basic form of a ledger is like the letter „T‟.
There are two types of ledgers, the General Ledger and the Subsidiary Ledger.
A. GENERAL LEDGER
General Ledger
Account Title: Cash Account No. 110
DATE EXPLANATION J.R. DEBIT CREDIT BALANCE
2020
Aug 21 Initial Investment J-1 500,000 500,000
General Ledger
Account Title: J Pacs, Capital Account No. 310
DATE EXPLANATION J.R. DEBIT CREDIT BALANCE
2020
Aug 21 Initial Investment J-1 500,000 500,000
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The account portion refers to the Account Title for example:
Cash, Accounts Receivable.
The account number is an assigned number for each account title to
facilitate ease in recording and cross-referencing.
The Date column identifies when the transaction happened.
The Item or Explanation represents the source journal and the nature
of the transactions.
The Journal Reference identifies the page number of the General or
Special Journal from which the information was taken.
The Debit and Credit columns are used in recording the amount of
transactions from the general journal or special journal.
The Balance Column represents the running balance of the Account
after considering the debit and credit amounts. If the running balance
amount is positive, the account has a debit balance whereas if it has a
negative running balance, the accounts has a credit balance.
a. From the journal, copy the Date of the transaction to the ledger.
b. Under the Journal Reference (J.R.) column of the ledger, copy the page
number of the journal.
c. Under the Debit column in the ledger, transfer the Debit amount from the
journal. Similarly, under the Credit column in the ledger, transfer the credit
amount from the journal.
d. After posting the amount to the ledger, write the Account Number in the
Posting Reference (P.R.) column on the journal.
B. SUBSIDIARY LEDGER
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The upper portion indicates the name of the vendor or supplier.
The vendor number is an assigned number for each vendor as
reference in keeping the records of a supplier.
The Date column identifies when the transaction happened.
The Item or Description Column describes the nature of transaction.
The Reference identifies the page number of the general our special
journal from which the information was taken.
The Debit and Credit columns reflect the various effects of every
transaction to the record of the supplier or vendor.
The Balance column provides the running balance of every supplier.
Take note that the total running balance for all subsidiary ledgers should
equal the Accounts payable general ledger.
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What I Have Learned
3. Sales Journal -
4. Purchases Journal -
What I Can Do
Activity 1:
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Journalize the following transactions of Tam-is Bakeshop for the month of
December
2020. Use the provided format below.
2020
December 3 Ms. Tam-is invested Php300, 000 in the business.
5 Paid cash Php 15,000 for electricity bill for the month.
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Assessment
Let us check how much you learned from this module‟s coverage.
Essay:
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Activity 1