OBJECTIVES

At the end of this lesson, the

learners will be able to:
1. Identify the uses of the two books of
accounts.
2. Explain and discuss the use of types of
book of accounts to record business
transaction.
3. Appreciate the importance of
journalizing and posting in a
business.
What is a journal and why it is called the
book of original entry?
 It is a chronological record ( day-by-
day) of business transactions. It is
called the book of original entry
because it is the accounting record in
which financial transactions are first
recorded.
What is a general ledger and why it is called
the book of final entry?
The ledger refers to the accounting
book in which the accounts and their
related amounts as recorded in the
journal are posted to periodically. It is
called the “book of final entry” because
all the balances in the ledger are used in
the preparation of financial statements.
The General Journal and
Special Journal
Journalizing – the process of recording a transaction

General journal – is the simplest type of journal

- this type of journal is unique among
journals .
- it is not cost effective and time
consuming.
JOURNALIZING PROCESS
1ST The date of the transaction which is entered in the
DATE column

2nd 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
3rd 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

4th A brief explanation of the transaction which

appears on the line below the credit account title.
5th 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.
Special journal - to speed up and simplify the
recording process. Each special journal is designed to
record a particular type of transaction efficiently and
quickly.

Examples of special journals are the following:

a. Cash Receipts Journal – used to record all cash that
had been received.
b. Cash Disbursement Journal – used to record all
transactions involving cash payments
c. Sales Journal (Sales on Account Journal) – used to
record all sales on credit (on account)

d. Purchase Journal (Purchase on Account Journal) –

used to record all purchases of inventory on credit (or
on account)
IMPORTANCE OF USING JOURNAL
Shows all information concerning a particular
transaction.
Provides a chronological record of all the financial
events in the business
USE OF GENERAL LEDGER
What is a general ledger?
 means of accumulating in one place all the information
about changes in an asset, liability, equity, income, and
expense accounts.

 Is often called a T- Account because of its resemblance to

the letter T.
ACCOUNT CODE ACCOUNT TITLE CLASSIFIED BY TYPE OF MAJOR
ACCOUNTS

Statement of Financial Position Accounts

1000 Cash
1200 Accounts Receivabl
1201 Allowance for Bad DebtS
1300 Inventory
1400 Prepaid Expenses
1500 Supplies
1600 Office Equipment ASSETS
1601 AccumDeprn - Off Eqpt
1650 Store Equipment
1651 AccumDeprn - Store Eqpt
1680 Transportation Equipmen
1681 AccumDeprn - Trans Eqpt
1750 Building
1751 AccumDeprn - Building
1800 Land
1900 Intangible Assets
2000 Accounts Payable LIABILITIES
 2100 Notes Payable
 2200 Accrued Expenses
2201 Salaries Payable
2202 Utilities Payable
2300 Income Taxes Payable

3000 Owner’s, Capital EQUITY

3100 Owner’s, Withdrawal
ACCOUNT CODE ACCOUNT TITLE CLASSIFIED BY TYPE
OF MAJOR ACCOUNTS

INCOME STATEMENT

4000 Service Revenue INCOME

4100 Sales
4101 Sales Returns and Allowances
 4102 Sales Discounts
4150 Interest Income
5000 Cost of Sales
 5100 Purchases
 5101 Purchase Returns & Allowances
5102 Purchase Discounts
5103 Freight In
 6100 Salaries Expense
6150 Supplies Expense
6200 Utilities Expense EXPENSES
6220 Communication Expense
 6250 Travel Expense
6300 Rental Expense
 6350 Fuel Expenses
6400 Advertising Expense
6410 Delivery Expense
6450 Commission Expense
 6500 Depreciation Expense
 6600 Taxes and Licenses
6700 Interest Expense
How are you going to determine the ending
balance of each account using the T- account?
In order to determine the ending balance of each
account using the “T-account”, the beginning balance
is plot in the appropriate debit or credit side, then total
debits and credits are then determined. If the account
has a beginning balance on the debit side, all the
debits during the period is added to the beginning
then all the credits are deducted. There is a debit
balance of the account if the sum of the beginning
balance and the total debits exceeds the total credits.
NORMAL BALANCES
1. Asset Accounts – Debit balance
Contra asset – Credit balance
ex. Allowance for bad debts
Accumulated Depreciation
2. Liability Accounts – Credit balance
3. Equity Accounts
a. Owner’s, Capital – Credit
b. Owner’s Withdrawal – Debit
4. Income – Credit
5. Expense - Debit
Transaction #1:
M. Santos, invests P250,000 to start an internet café business.
Journal entry #1:1ST The date of the transaction which is
entered in the DATE column

Cash                                 P250,000
M. Santos, capital                              P250,000
To record M. Santos initial capital.
Transaction #2:
Santos purchase 5 sets of computer equipment on credit
amounting to P100,000.
Journal entry #2:
Computer equipment   P100,000
Accounts payable                                 P100,000
To record purchase of 5 sets of computer equipment on
account worth P100,000
Transaction #3
Santos buys computer supplies for cash worth P50,000.
Journal entry #3:
Computer supplies   P50,000
Cash                                                        P50,000
To record purchase of computer supplies on cash worth P50,000
Transaction #4
Santos pay his taxes and licenses amounting to P20,000.
Journal entry #4
Taxes and licenses   P20,000
Cash                                                    P20,000
To record payment of taxes and licenses
Transaction #5
Santos obtain a bank loan for business use and receives P100,000
Journal entry #5
Cash                        P100,000
Loans payable                          P100,000
To record bank loan received amounted to P100,000
Transaction #6
Customers pay cash for internet rental amounted to
P5,000.
Journal entry #6
Cash                                          P5,000
Internet service income                   P5,000
To record internet rental income received on cash
Transaction #7
Render printing servicesto customer on account
amounted to P4,000.
Journal entry #7
Accounts receivable          P4,000
Printing service income                       P4,000
To record printing services income on customers
account
Transaction #8
Santos paid in full the computer equipment he purchased on
account (see transaction #2).
Journal entry #8
Accounts payable  P100,000
Cash                                                        P100,000
To record full payment of computer equipment purchased on account
Transaction #9
Santos paid his monthly rental for the internet café shop space.
Journal entry #9
Rental expense   P5,000
Cash                                              P5,000
To record monthly rental expense paid
Transaction #10
Santos pays salaries and wages of his staff and employees, P20,000
Journal entry #10
Salaries and wages   P20,000
Cash                                                     P20,000
To record salaries and wages of employees
Note: Journal entry #10 will become different when there are
withholding taxes, SSS, PHIC, HDMF and other employees benefits
or deductions involved.
Transaction #11
Santos collects its accounts receivables amounted to P4,000 from
customers (see transaction #7).
Journal entry #11
Cash                                    P4,000
Accounts receivable                        P4,000
To record collection of accounts receivable
Transaction #12
Supplies amounted to P3,000 were used in business operation (see
transaction #3).
Journal entry #12
Computer Supplies expense P3,000
Computer supplies                                        P3,000
To record used supplies
Transaction #13
Santos withdraws P25,000 cash for personal use.
Journal entry #13
Santos, drawing   P25,000
Cash                                                    P25,000
To record cash drawn by Santos for his personal use
Transaction #14
Santos invested additional cash capital amounting P50,000.
Journal entry #14
Cash                         P50,000
Santos, Capital                               P50,000
To record additional cash capital invested to the business