Fundamentals of Accountancy,

Business and Management 1

Quarter 1 – Module 5
Books of Accounts

Lesson

1 Books of Accounts

Books are essential to all of us. They are a

common source of information and an integral tool for
learning. In every field of study, there is a specialized
book to be used.

Books can also be used for documenting or

recording important data, such as in the field of
business, particularly in accounting. Accountants use
general journal and ledger and other special journals for different business
transactions. These
are like books where you can find mostly financial information and records of
transactions which can be used as reference in decision-making for the success
of one’s business management.

The general journal is the “book of original entry” where you can find the
initial record of the transactions of a firm while the ledger contains the total or
balance of each account.

What’s In

Directions: Identify what is described in each number. Choose your answer from
the box. Write your answers on a separate paper.

Chart of Accounts Notes Payable

Liabilities Non-Current Asset
Owner's Equity Notes Receivable
Assets Prepaid Expenses
 Capital Cash

____________ 1. These are the debt of the company payable in money, goods, or
services.
____________ 2. It is the list of all the accounts of the company that is being used
by the firm to their financial records.
____________ 3. These are the resources owned by the owner.
____________ 4. It is the claim of the owner on the business.
____________ 5. It is the most liquid asset.
____________ 6. It is a written note from the customer to pay his account on a
given time and date.
____________ 7. Land and building are examples of these assets.
____________ 8. These are debts that are supported with a written note or promise.
____________ 9. These are the resources or assets that have been invested in the
business.
____________ 10. These are the bills paid in advance.

What’s New

Directions: Read each statement below carefully. Write T if you think the statement
is true and F if the statement is false. Write your answers on a separate sheet of paper.
____________ 1. The general ledger is the most basic journal.
____________ 2. In recording, you are entering data transaction in the journal.
____________ 3. All entries involve only two accounts: one debit and one credit.
____________4. Accounting is the process of identifying, recording, and
communicating economic events.
____________ 5. Cash Disbursement Journal is used to record all cash that have
been received.
____________ 6. Cash Receipts Journal is used to record all transactions involving
cash payments.
____________ 7. Sales Journal is used to record all sales on credit.
____________ 8. Purchase Journal is used to record all purchases of inventory on
credit.
____________ 9. A general ledger is a group of accounts containing the
independent data of a specific general ledger.
____________ 10. General Journals are books of original entry.

What Is It
 According to Weygandt (2005), “Accounting is the process of identifying,
recording, and as well as communicating economic events of an organization to
different interested users.” These three parts of the process are expounded in the
Teaching Guide for Senior High School, Fundamentals of Accountancy, Business
and Management 1. It explains where we record the identified transactions and
what tools to document these transactions. It also highlights how important
these records are in accounting.

Process of Accounting

Recording transactions and events in chronological order is

the best thing that a company can do. They are listed in the
journal which is known as the “book of original entry”. It
clearly shows the debit and credit effects on specific accounts
in every transaction. The general and the special journal are
the main types of accounting journal.
General Journal

The general journal is the most basic journal. It is composed of spaces for
dates, account titles and explanations, references, and two columns for the
amount.
Here are its significant contributions in the recording process.
• It imparts the complete effects of a transaction in one place.
• It presents a chronological record of transactions.
• It helps to avoid or notice errors in a way that the debit and the credit amounts
for each entry can be easily compared.

The figure below is an example of a general journal of JST Restaurant:

Account Title and

Date Ref. Debit Credit
Explanation
2020
June Cash Php
1 50,000.00
Dantes, Capital Php
50,000.00
Initial investment
 As you can see, it includes columns for the date of the transaction, the title of
the accounts to be debited and credited, the reference, the amount of each debit
and credit, and explanation of the transaction.

Journalizing Process
Entering transaction data in the journal is known as “journalizing”.
Businesses make separate journal entries for each transaction. The Date,
Account Title and Explanation, P.R., Debit and Credit.

• The date of the transaction is entered in the Date column.

• The debit account title or the account to be debited is entered at the extreme
left margin of the Account Titles and Explanation column, and the amount
of debit to be recorded is written in the Debit column.
• The credit account title or the account to be credited is entered in the next
row in the column of Account Titles and Explanation. The amount of the
credit is recorded in the Credit column.
• A short explanation of the transaction appears on the line below the credit
account title (a space is left between journal entries to separate individual
journal entries and to make the reading of the journal easy).
• The column titled P.R. known as posting reference is left blank when the
journal entry is made. (This column will be used when the journal entries are
transferred to the ledger accounts.)

Using the following transactions, we are going to illustrate the recording of

transactions of Mr. Ven Dela Rosa in the general journal.
• October 1, 2019 – He invested Php 300,000.00 in a restaurant business by
opening an account in Velez Bank.
• October 3, 2019 – He purchased kitchen appliances for his business
amounting to Php150,000.00 on cash basis.
• October 14, 2019 – He started his operations and made sales for that day
amounting to Php 50,000.00.

Analyze the table.

Account Title and
Date P.R Debit Credit
Explanation
10/01/19 Cash Php
V. Dela Rosa, Capital 300,000.00 Php
To record initial 300,000.00
investment
10/03/19 Kitchen Appliances
Cash 150,000.00
To record purchase of 150,000.00
kitchen appliances
10/14/19 Cash
Sales 50,000.00
To record sales 50,000.00
 In simple entry, there are only two accounts: one debit and one credit. If the
transactions require more than two accounts in journalizing, it is called the
“compound entry”. All of the transactions in the example above are simple
entries.
Here is an example of a compound entry. Read and analyze.

On October 28, 2019, Mr. Dela Rosa purchased a motorcycle which costs
Php 110,000.00. He paid Php 80,000.00 cash and agreed to pay the remaining
Php 30,000.00 within the month. The compound entry is as follows:

Account Title and

Date P.R Debit Credit
Explanation
10/28/19 Motorcycle Vehicle Php
Cash 110,000.00 Php
Accounts Payable 80,000.00
To record purchase Php
of motorcycle by paying 30,000.00
cash and the balance on
account
Special Journals

Some businesses encounter voluminous quantities of similar and recurring

transactions which may create congestion if these transactions are recorded
repeatedly in a single day or a month in the general journal.

We use different special journals and these are the following:

• Cash Receipts Journal
This is used to record all the cash that has been received.
• Cash Disbursements Journal
This is used to record all the transactions involving cash payments.
• Sales Journal or the Sales on Account Journal
This is used to record all sales on credit or on account.
• Purchase Journal or the Purchase on Account Journal
This is used to record all purchases of inventory on credit or on account.
Date Description Ref. Debit Credit Credit Credit
(Particulars) Cash Sales Accounts Sundry
Receivable

• Cash Receipts Journal

This is used to record transactions involving receipt or collection of
cash.
• The date of the transaction is written in the date column.
 • A brief explanation of the transaction is entered in the Description
column.
• A column entitled P.R. for (Posting Reference) is left blank when the
journal entry is made because it will be used later when the journal
entries are transferred to the ledger accounts.
• The amount of cash received for a particular transaction is placed in
the Debit Cash column, and
• The major categories of receipts ( cash sales and collections of account
receivables ) are put in separated columns because these transactions
are frequent and repetitive items.

The Sundry column is used for various miscellaneous and less regular items
such as capital investment and receipt loan proceeds.

The Official Receipts or Cash Receipts issued by the business is the source
document for this journal.

Cash Disbursements Journal (CDJ)

The cash disbursements journal is the opposite of the cash receipts journal.
We record all cash payments in the journal.
The table below is a cash disbursement journal of JST Restaurant:
Date Description P.R. Check Credit Debit Debit Debit Credit
(Particulars) or Cash Accounts Salaries Supplies Sundry
Voucher Payable
No.

2020

July 1 Paid employees

101 Php 30,000.00 Php 30,000.00

The date of the transaction is written in the Date column.

• A brief explanation of the transaction is written in the Description
column.
• The column titled P.R. known as (Posting Reference) is left blank when
the journal entry is made. We will use this column later if the journal
entries are transferred to the ledger accounts.
• When it comes to related cash payment, the check or voucher number
represents the identifying number of the check issued. There were
times that a check or cash voucher accompanies the disbursement. We
can also use the voucher number as an alternative for this column.
• The amount of cash received for a particular transaction is entered in
the Debit Cash column.
• Major categories of receipts (cash sales, and collection of accounts
receivable) are provided with separate columns because these
transactions are frequent and repetitive items.
• For various miscellaneous and less regular items (capital investment,
receipt of loan proceeds), the Sundry column is used.
 • In updating the journal, the source documents are the check voucher
or cash voucher, cash receipts or official receipts from suppliers or
vendors.

Sales Journal/Sales on Account Journal

The Sales Journal or Sales on Account Journal is used in recording several
sales transactions on account. For credit transactions with various customers or
clients, the source document for this journal is the charge invoice or sales
invoice.
An example of Sales Journal of JST Restaurant is shown below:

Description Sales Debit

Credit
Date (Customer's P.R. Invoice Accounts
Sales
Name) No. Receivable
2020
August Masikap Express 010 Php Php 20,000.00
20,000.00

• The date of the transaction is entered in the Date column of JST

Restaurant sales journal.
• A brief explanation of the transaction is entered in the description
column or the name of the customer of JST Restaurant sales journal.
• The column titled P.R. or (Posting Reference) is left blank when the
journal entry of JST Restaurant is made. This column is used later
when the journal entries of JST Restaurant are transferred to the ledger
accounts.
• The Charge Invoice Number or Sales Invoice Number of JST Restaurant
sales journal represents the identifying number of the source document
issued to the customer when the sale was made.
• The Debit Accounts Receivable column of JST Restaurant sales journal
represents the amount of the sale transactions indicated in the charge
invoice.
• The Credit Sales column of JST Restaurant sales journal represents the
amount of the sale transactions indicated in the charge invoice.
• The source document for JST Restaurant’s journal is the Charge Invoice
issued by the business.
Purchase Journal/Purchases on Account Journal
We usually record repeating transactions of purchases made on account
through the Purchase Journal or the Purchases on Account Journal. The
purchase journal’s source documents are the invoices from the supplier of the
said company.
An example of a Purchase Journal of JST Restaurant is shown below:
 Date Description P.R. Sales Debit Credit
(Supplier's Invoice Purchases Accounts
Name) No. (from Payable
supplier)
2020
Oct. 1 Freeway 002011 Php Php
Express 40,000.00 40,000.00

• The date of the transaction of JST Restaurant is entered in the Date

column.
• A brief explanation of the transaction of JST Restaurant is entered in
the description column or the name of the supplier.
• The column titled P.R. stands for posting reference which is left blank
when the journal entry of JST Restaurant is made. This column is used
later when the journal entries of JST Restaurant are transferred to the
ledger accounts.
• The Charge Invoice Number or Sales Invoice Number of JST Restaurant
represents the identifying number of the source document issued by
the supplier when the items, goods or merchandise were delivered to
JST Restaurant when the purchase was made.
• The Debit Purchases column on the purchase journal of JST Restaurant
represents the amount of the goods purchased as indicated in the
charge invoice from the supplier.
• The Credit Accounts Payable column in the JST Restaurant purchase
journal represents the amount of the goods or items purchased on
credit from the supplier.
• The amount is indicated in the charge invoice issued by the supplier of
JST Restaurant.
• The charge invoice from the supplier or vendor is the source document
for this journal.

An accounting book in which the accounts and

their related amounts as recorded in the journal
which are posted periodically is called the ledger
which is also known as the book of final entry.
The reason is that all the balances in the ledger
are used in the preparation of financial
statements. It is also referred to as the TAccount
because the basic form of a ledger is like the letter
“T”.
There are two kinds of ledgers: the general ledger and the subsidiary ledger.
professionals call it, summarizes all the activities that have taken place as
recorded in its subsidiary ledger that is why it is known as the controlling account.
The format of a general ledger of JST Restaurant is shown below:
Account Title: Account No.:
Date Item P.R. Debit Credit Balance

• The account portion refers to the account title (cash and accounts
receivable).
• The account number is an assigned number for each account title of the
JST Restaurant to facilitate ease in recording and cross-referencing.
• The Date column of JST Restaurant’s general ledger identifies when the
transaction happened.
• The item represents the source journal and the nature of the transactions
of JST Restaurant.
• The Reference of JST Restaurant’s general ledger 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 number of
transactions from the general journal or special journal.
• The Balance Column of JST Restaurant’s general ledger 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
have a credit balance.

Subsidiary Ledger

A subsidiary ledger is a group of similar accounts that consists of an

independent data of a specific general ledger. It is officially created or maintained
if individualized data is needed for a specific general ledger account. Individual
record of various payables to suppliers is the best example of a subsidiary ledger.
When we total the amount of all subsidiary ledgers it should equal the balance
in the Accounts Payable of the general ledger.

A format of subsidiary ledgers of JST Restaurant is shown below:

Accounts Payable
Subsidiary Ledger
Vendor/Supplier: Vendor No.:
Address:
Date Item P.R. Debit Credit Balance
 • The upper portion indicates the name and address of the vendor or
supplier of JST Restaurant.
• The vendor number of JST Restaurant’s subsidiary ledger is an assigned
number for each vendor as a reference in keeping the records of a
supplier.
• The Date column of JST Restaurant’s subsidiary ledger identifies when
the transaction happened.
• The description column of JST Restaurant’s subsidiary ledger describes
the nature of the transaction.
• The Reference of JST Restaurant’s subsidiary ledger identifies the page
number of the general or special journal from which the information was
taken.
• The Debit and Credit columns of JST Restaurant’s subsidiary ledger
reflect the various effects of every transaction to the record of the supplier
or vendor.
• The Balance column of JST Restaurant’s subsidiary ledger provides the
running balance of every supplier.

Take note that the total running balance for all subsidiary ledgers of JST
Restaurant should be equal to the accounts payable in the general ledger.

What’s More

Directions: Identify the appropriate journal to be used in each item below. Choose
from the book of accounts listed in the box. Write your answers on a
separate sheet of paper.

General Journal Sales Journal Purchase Journal

Cash Receipt Journal Cash Disbursement Journal

1. Mr. Ong invested an equipment on his own business worth of Php

200,000.00.
2. Aling Lita sold merchandise on account worth of Php 3,000.00.
3. Mr. Valdez purchased a vehicle worth of Php 150,000.00 on account.
4. Rhea received Php 20,000.00 for the services that she rendered.
5. Janice paid the salaries of her employees on her accounting firm with
the amount of Php 30,000.00.
6. Khariz bought office supplies on cash basis amounting to Php 2,000.00.
7. Trishi received cash of Php 5,000.00 on the sales she made.
 8. Mr. Melbourne purchased supplies amounting to Php 1,500.00 with the
terms of 2/2, n/30.
9. Julie sold merchandise amounting to Php 20,000.00 with the terms of
2/5, n/30.
10. Mr. Ong withdrew cash worth of Php 3,000.00 for his personal use.

What I Have Learned

Directions: Fill in the blanks with the correct accounting term/s.
Choose the answers from the box below and write them on a separate
sheet of paper.

Chronological General ledger Compound Entry

Subsidiary ledger Cash Receipts Journal Purchase Journal

Cash Disbursement Journal Ledger Special Journal

Journalizing Special Journal Date

Simple entry Communicating Description Column

1. Entering transaction data in the journal is known as _______________.

2. An entry that requires three or more accounts is called ______________.
3. An entry that only involves one debit and one credit is known as
_______________.
4. Recording transactions involving receipt or collection of cash is called
____________.
5. The journal where all cash payments are recorded is known as
_______________.
6. The accounting book in which the accounts and their related amounts
are recorded in the journal is referred to as _______________.
7. The grouping of all accounts used in the preparation of financial
statements is called ______________.
8. The group of accounts containing the independent data of a specific
general ledger is referred to as ______________.
9. Recurring transactions of purchases on account are recorded in
_______________.
10. Cash Receipts Journal, Cash Disbursement Journal, Sales Journal are
examples of ________________.
11. Accounting is the process of identifying, recording and ______________.
12. Companies initially record transactions and events in _____________
order.
13. There are two types of journals: the general journal and _______________.
14. A brief explanation of the transaction is entered in the ________________.
15. The date of transaction is entered in the _____________ column.
1