JOURNAL

Companies initially record transactions and events in chronological order (the order
in which they occur). Thus, the journal is referred to as the book of original entry. For each
transaction, the journal shows the debit and credit effects on specific accounts. The use of a
journal provides the following advantages (Tugas, Salendrez and Rabo 2016):
1. It provides a systematic and chronological record of transaction;
2. It simplifies the ledger as some details in the journal need not be written in the
ledger,
3. It provides adequate explanation of each entry and presents necessary information
about the transactions such as the account debited and credited and related
amounts;
4. It ensures that the double-entry bookkeeping system is observed when recording
transactions; and
5. It helps in solving misunderstanding in business because it serves as proof and legal
evidence of transaction.
There are two types of journals, the general journal, and the special journal.

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.

General Journal
Date Account Title and Explanation Ref Debit Credit

There is no need to draw the format of a General Journal; there are available books of this
format that can be bought in a bookstore. All you have to do is to fill it up. You can use a
two-column book for a general journal
Note that when using the general journal, always make sure that the accounting equation
will be maintained as the debit entry will be accompanied by a credit entry. The total debits
should always equal with the total credits
Journalizing Process
Entering transaction data in the journal is known as journalizing.Companies make
separate journal entries for each transaction. A complete entry consists of
 The date of the transaction which is entered in the Date column.
 The debit account title (that is, the account to be debited) 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.
Tip: The account title to be used in the column provided should coincide with the titles that
are listed in the Chart of Accounts.
 The credit account title (that is, the account to be credited) 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.
 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.
 The column titled Ref. (which stands for 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.
To illustrate the recording of transactions in the general journal, let us use the following
transactions as an example:
 September 1, 2015 Mr. Ben Mabait invested P500,000 in a restaurant business by
opening an account with SuperBank
 September 5, 2015 purchased kitchen appliances for his business amounting to
P100,000 by issuing a check.
 September 6, 2015 started his operations a made sales for that day amounting to
P20,000,
We will now record the above transactions in the general journal.

General Journal
Date Account Title and Explanation Ref Debit Credit
9/1/15 Cash 500,000 500,000
B.Mabait, Capital
To record investment of Mr. Ben Mabait
9/5/15 Cash 100,000 100,000
Kitchen Appliances
To record purchase of kitchen appliances
9/6/15 Cash 20,000 20,000
Sales
To record sales for the day
Some entries involve only two accounts, one debit and one credit. An entry like these is
considered a simple entry. Some transactions, however, require more than two accounts in
journalizing. An entry that requires three or more accounts is a compound entry. All of the
transactions in the above examples are simple entries
An example of a compound entry is the following:
On September 7, 2015, Mr. Mabait purchased a motorcycle costing P80,000. He pays
P30,000 cash and agrees to pay the remaining P50,000 on account (to be paid later).
The compound entry is as follows:

General Journal
Date Account Title and Explanation Ref Debit Credit
9/7/15 Transportation Equipment 80,000
Cash 30,000
Account Payable 50,000

To record purchase of motorcycle by

paying cash and the balance on account

It is important to use correct and specific account titles in journalizing. The main
criterion is that each title must appropriately describe the content of the account. Some
practitioner or CPA uses "Description or Particulars" instead of Account Titles and
Explanation. Moreover, make sure that for every journal entry the total debits and credit
should always be equal. If not, the entry is erroneous.

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. Take the case of our example above; if Mr. Mabait 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.
The following are the commonly used special journals:
 Cash Receipts Journal - used to record all cash that has been received
 Cash Disbursements Journal - used to record all transactions involving cash
payments
 Sales Journal (Sales on Account Journal) - used to record all sales on credit (on
account)
 Purchase Journal (Purchase on Account Journal) - used to record all purchases of
inventory on credit (or on account)
Cash Receipts Journal (CRJ)
Cash Receipts Journal is used to record transaction involving receipt or collection of cash.
The following illustrate the format of a cash receipts journal:

Cash Receipts Journal

Date Description (Particular) Ref Debit Credit Credit Credit
Cash Sales Account Sundry
Receivable

The format may vary depending on the nature of business and the frequency of
transactions. The following are the parts of a CRJ
 The date of the transaction is entered in the date column.
 A brief explanation of the transaction is entered in the description column.
 The column titled Ref. (which stands for 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
 The Debit Cash column represents the amount of cash received for a particular
transaction.
 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.
The source document for this journal is the Official Receipts or Cash Receipts issued
by the business.
Cash Disbursements Journal (CDJ)
The cash disbursements journal is the opposite of the cash receipts journal. It is the
journal where all cash payments are recorded. An example of a cash disbursement journal is
shown below:
 Cash Receipts Journal
Date Description Re Check Credit Debit Debit Debit Credit
(Particular) f of Cash Account Salaries Supplie Sundry
Voucher Receivable s
Number

The following are the parts of a CDJ:

 The date of the transaction is entered in the date column.
 A brief explanation of the transaction is entered in the description column.
 The column titled Ref. (which stands for 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.
 The Check or Voucher number represents the identifying number of the check issued
for the related cash payment. Most of the time, a check or cash voucher
accompanies the disbursement. The voucher number may be used as the alternative
for this column.
 The Debit Cash column represents the amount of cash received for a particular
transaction.
 Major categories of receipts, such 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.
The source documents used to update this journal 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. The source document for this journal is the charge invoice or sales
invoice (for credit transactions) to various customers or clients. An example of a sales
journal is shown on next page.
 Sales Journal
Date Description (Costumer name) Ref Charge Debit Credit
Invoice or Accounts Sales
Sales Invoice Receivable
No.

The following are the parts of a Sales Journal (Sales on Account Journal):
 The date of the transaction is entered in the date column.
 A brief explanation of the transaction is entered in the description column or the
name of the customer.
 The column titled Ref. (which stands for 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.
 The Charge Invoice Number or Sales Invoice Number represents the identifying
number of the source document issued to the customer when the sale was made
 The Debit Accounts Receivable column represents the amount of the sale
transactions indicated in the charge invoice.
 The Credit Sales column represents the amount of the sale transactions indicated in
the charge invoice.
The source document for this journal is the Charge Invoice issued by the business.

Purchase Journal (Purchases on Account Journal)

The Purchase journal or the 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. An example of a Purchase Journal is shown on
next page.

Purchase Journal
Date Description (Costumer name) Ref Charge Debit Credit
Invoice or Purchases Account
Sales Invoice Payable
No. (from
suppliers)
The following are the parts of a Purchase Journal (Purchase on Account Journal):
 The date of the transaction is entered in the date column.
 A brief explanation of the transaction is entered in the description column or the
name of the supplier
 The column titled Ref. (which stands for 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.
 The Charge Invoice Number or Sales Invoice Number represents the identifying
number of the source document issued by the supplier when the items, goods or
merchandise were delivered to the company when the purchase was made.
 The Debit Purchases column represents the amount of the goods purchases as
indicated in the charge invoice from the supplier.
 The Credit Accounts Payable column 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.
The source document for this journal is the charge invoice from the supplier or vendor.

LEDGERS
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'. The use of a journal provides the following advantages (Tugas,
Salendrez and Rabo 2016):
1. It provides detailed information about the revenues and expenses in one place,
hence results of business operations can be easily determined;
2. It provides detailed information about assets, liabilities, and owner's equity of the
business, thus, the financial position of the business can easily be known;
3. It assists management in monitoring business performance through information in
individual ledger accounts, and
4. It serves as tool for auditors to track the flow of business transactions for a given
period of time.
There are two kinds of ledgers, namely, the general ledger and the subsidiary ledgers.

General Ledger
The general ledger (commonly referred by accounting professionals as GL) is a
grouping of all accounts used in the preparation of financial statements. The GL is a
controlling account because it summarizes all the activities that have taken place as
recorded in its subsidiary ledger.
The format of a general ledger is shown below:
 General Ledger
Account Cash Account No: 1000
Date Item Ref Debit Credit Balance

 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 represents the source journal and the nature of the transactions
 The Reference identifies the page number of the general our 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.

Subsidiary Ledger
A subsidiary ledger is a group of like accounts that contains the independent data of a
specific general ledger. A subsidiary ledger is created or maintained if individualized data is
needed for a specific general ledger account. An example of a subsidiary ledger is the
individual record of various payables to suppliers. The total amount of these subsidiary
ledgers should equal the balance in the Accounts Payable general ledger.
An example of a subsidiary ledgers is shown below:

Accounts Payable
Subsidiar Ledger
Vendor/Supplier: Joy Food Corporation Vendor No. 201
Address: Jose St, Sampaloc, Manila
Date Item Ref Debit Credit Balance
The following are the parts of a Subsidiary Ledger:
 The upper portion indicates the name and address 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 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.

Journal vs Ledger
The infographics below will give you the key differences between a journal and a ledger.