BOOK OF ACCOUNTS

PREPARED BY : PROF. JONAH C. PARDILLO

 LEARNING OBJECTIVES

After reading this chapter, you should be able to:

 Identify the uses of the two books of accounts

 Illustrate the format of a general and special journals

 Illustrate the format of a general and subsidiary ledger

 Introduction
1. What is journal?
2. Do all business use the same form of journals?
3. What are the parts of journal entry?
4. What is the difference between a simple entry and a compound entry?
5. If the transaction does not involved cash, what would be the basis for recording the value received and the value given
up?
6. What information is included in the explanation of a journal entry?
7. What are the purposes of the posting references in a journal entry?
 Accounts

 Accounts is a sorting device used to record, classify, and summarize the increases and decreases in the
balance of each accounting element as a result of the completed transactions of the business enterprise.
 An account is maintained for each item of asset, liability, equity, income, and expense
of a reporting entry.
 An account is similar to capital letter T, with a left and right side. The left side of an account is
popularly called debit or debit side, while the right is credit or credit side.
 Each account is assigned an account title or account name, which is usually written
immediately above the letter T.
 Groups of accounts
1. Permanent accounts or real accounts
- these accounts are reported in the balance sheet

2. temporary or nominal accounts

- temporary accounts are reported in the income statement

3. Mixed accounts
- these accounts contains both the permanent and temporary components. However, at the end of each reporting
period, the mixed accounts are adjusted and the components are broken down, so that there are no more mixed
accounts by the time financial statements are prepared.
 Books of Accounts

 Book of accounts for the preparation of the financial statements and the other reports needed by the data-
users, where the business transactions are recorded, classified, and summarized.
 Journals and Ledgers are two books were stamped by the Bureau of Internal Revenue before any
business transaction could be recorded therein.
 Journals

 It is referred to as the book of original entry.

 A journal could either be a general journal or a special journal, depending on the type
of transactions that are recorded therein.
 General journals recorded all types of business transactions.
 Special journals may be used to be able to group specific types of transactions in one book of original
entry. For example: all cash receipts maybe recorded in cash receipts journal, while cash payments are
taken up in a cash payments journal.
 Advantages of Journals

 Transactions are recorded in the journals in chronological order, it then becomes

easier to locate a transaction.
 Theprocess of classifying and sorting of the financial data is facilitated since both debit and credit
account titles and amounts are clearly and systematically reflected on the same page of the
journal. It simplifies the analysis of a business transaction if all its effects are right in front of the
analyst.
 Con’t…

 the analysis of a business transaction if all its effects are right in front of the
analyst.
 The use of journals helps avoid omissions or duplications in the recording and posting processes.
Since each journal entry has equal debit and credit amounts errors in recording and posting are
easier to locate and trace.
 The task of auditing the records becomes less difficult since the auditor could clearly see how the
accountant recorded each business transaction.

Cont…
Journalizing
… is the process of recording or entering a business transaction in a journal.
 (2) Account title debited
 Parts of journal entry:
o The date when the transaction occurred.
o The effects of the transaction as reflected by the account titles debited and
account titles credited.
o The monetary values (debit values and credit values) assigned to each
accounting element that is affected by the transaction.
o A brief and clear explanation of the transaction.
(1) Date (4) Explanation
o The posting references showing the code of the destination leger account.

(2) Account title credited

Journal Sample
Date Account title/Explanation PR Dr. Page 1 Cr.
2001
Jun 16 Cash 11 1 0 0 0 0 0
(5) Posting References (destination account number)
Juan de la Cruz, Capital 51 1 0 0 0 0 0
Original investment
(3) Debit amount
(3) Credit amount
 Guidelines and application of Journal
format

On the February 27, 2008, one of the transactions of the enterprise was: “Rendered services to
customers on cash bases, P15,000.”
1. The name of the journal is usually written on top of each page, in this case, General Journal.
2. The page number must be written on the top corner of each journal page. In
this case, it is assumed that the entry is on Page 2 of the journal.
3. The year of the transaction is written on top of the date column.
 Guidelines and application of Journal
format

4. It is an accepted practice to abbreviate the month.

5. The debt account titles must be written very close to the right edge of the date
column.

6. The credit account titles must be written about half an inch from the right edge of the
date column.
7. It is optional to use signs with the debit and credit amounts. If the paper to be used does not have printed
money columns, writing the peso signs with the debit and credit amounts is necessary.
 Guidelines and application of Journal
format

8. The debit and credit amounts of the entry are entered in separate and proper money columns.
9. Each digit of the amounts must be written on the proper slots of the money columns in order to
identify the centavos, hundreds, thousands, etc.
10. If the paper to be used has printed money columns, there is no need t use a comma(,) to
segregate the hundreds from the thousands, or a period (.) to separate the whole pesos from the
centavos, as long as each digit is written in the proper slot.
 Guidelines and application of Journal
format

11. If a debit or credit amount has no centavos, writing a dash(-) in the slot for the centavos would
be sufficient to indicate this.
12. Each journal entry must have clear but brief explanation that should be written immediately
after the credit account titles. (In this case, it is assumed that the term of the transaction is 30
days.)
13. After posting the debits and credits to the proper general ledger accounts, the posting
references must be indicated. In this case, it is assumed that the postings were made to ledger
accounts with code numbers 12 and 75.
 General Journal Sample

General Journal Page 2

Date Account title/Explanation PR Dr. Cr.
2008
Jun 16 Cash 11 1 0 0 0 0 0
Juan de la Cruz, Capital 51 1 0 0 0 0 0
Original investment
 Journalizing the transactions of Reliable Repair Shop: Sample

June 16 --- Juan de la Cruz, proprietor, invested his P100,000 cash savings in a repair shop.
De la Cruz registered the business under the name “Reliable Repair Shop”.

General Journal Page 1

Date Account title/Explanation PR Dr. Cr.

2001
Jun 16 Cash 11 1 0 0 0 0 0
Juan de la Cruz, Capital 51 1 0 0 0 0 0
Original investment
 June 16 --- Bought shop tools, on cash basis, P12,000
General Journal
Date Account title/Explanation PR Dr. Cr.
2001
16 Tools 1 2 0 0 0 -
Cash 1 2 0 0 0 -
For shop use

June 17 --- Bought shop equipment from Grasco Equipment Corporation, P65,500.
Term: on credit
Date Account title/Explanation PR Dr. Cr.
2001
17 Equipment 6 5 5 0 0 -
Accounts payable 6 5 5 0 0 -
From Garsco Equipment Corp
 June 17 --- Paid City Hall for the necessary business permits and licenses, P1,950.
General Journal
Date Account title/Explanation PR Dr. Cr.
2001
17 Taxes and licenses expense 1 9 5 0 -

Cash 1 9 5 0 -

Permits and licenses from the year 20-1

June 18 --- Bought supplies from Weldone Industries, Inc., P3,000. Term: Cash
General Journal
Date Account title/Explanation PR Dr. Cr.
2001
18 Supplies expense 3 0 0 0 -

Cash 3 0 0 0 -

From Weldone Industries, Inc.

 June 19 --- Bought supplies from McMaster Industries, Inc., on credit, P8,500
General Journal
Date Account title/Explanation PR Dr. Cr.
2001
19 Supplies expense 8 5 0 0 -

Accounts payable 8 5 0 0 -

From McMaster Industries, Inc.

June 19 --- Borrowed P20,000 from a finance company, to be used to meet the cash requirements of the shop.
Term: 2-year, 12% note maturing on June 19, 2003.
Date Account title/Explanation PR Dr. Cr.
2001
19 Cash 2 0 0 0 0 -

Loans payable 2 0 0 0 0 -

2-year,12% note was given

June 25 --- Rendered repair services for cash to customers from June 20 to 25, P13,250.
General Journal
Date Account title/Explanation PR Dr. Cr.
2001
25 Cash 1 3 2 5 0 -

Service revenues 1 3 2 5 0 -

Cash services, from June 20-25, 20-1

June 25 --- Rendered repair service to various customers from June 20 to 25, P18,500. Term: on credit

General Journal Page 2

Date Account title/Explanation PR Dr. Cr.
2001
25 Accounts receivable 1 8 5 0 0 -

Service revenues 1 8 5 0 0 -

Credit services, from June 20-25, 20-1

June 25 --- Paid in full the amount due to Grasco Equipment Corporation.
General Journal
Date Account title/Explanation PR Dr. Cr.
2001
25 Accounts payable 6 5 5 0 0 -

Cash 6 5 5 0 0 -

Paid Grasco Equipment Corp. in full

June 26 --- Collected in full the P2,500 due from Karlo Mijares, one of the customers who received
services from the business on credit basis.
Date Account title/Explanation PR Dr. Cr.
2001
26 Cash 2 5 0 0 -

Accounts receivables 2 5 0 0 -
Collected from Karlo Mijares in full
June 27 --- Paid the wages of a part-time shop assistant, for the period from June 18-27, P3,000.
General Journal
Date Account title/Explanation PR Dr. Cr.
2001
27 Wage expense 3 0 0 0 -

Cash 3 0 0 0 -

From June 18 to 27,20-1

June 30 --- Paid rent to Fame Realty covering the period from June 16 to August 15, P14,000.

Date Account title/Explanation PR Dr. Cr.

2001
30 Rent expense 1 4 0 0 0 -

Cash 1 4 0 0 0 -
From June 16 to August 15, 20-1
June 30 --- A tenant who operations a copier machine is using a small corner of the shop. Rent collected from June 16 to July 15
amounted to P800.
General Journal
Date Account title/Explanation PR Dr. Cr.
2001
30 Cash 8 0 0 -

Rent revenue 8 0 0 -

From June 16 to July 15, 20-1

June 30 --- Juan de la Cruz withdrew P10,000 cash from the business’ collections, for his family’s use.

Date Account title/Explanation PR Dr. Cr.

2001
30 Juan de la Cruz, Drawing 1 0 0 0 0 -

Cash 1 0 0 0 0 -
Withdrawal for family’s use
 Ledger
 Ledger also known as book of final entry

- is a systematic compilation of several accounts.

 The ledger is used as a tool to classify the recorded transactions for the purpose of getting the final balance of each
account. It may either be a general ledger or a subsidiary ledger, depending on the nature of accounts found therein.
 The debits and credits in the journal entries are classified and summarized in the ledger accounts.
 Posting is the process of transferring the data from the journal to the ledger accounts.
Advantages of ledger or ledger accounts

o Classifying or sorting of the numerous transactions is facilitated with the use of the ledger
accounts. The preparation of the financial is also aided.
o If postings are up-to-date, the ending balance of any account can easily be determined
even before preparing the trial balance of any account can easily be determined even
before preparing the trial balance or the financial statements.
 Advantages of ledger or ledger accounts

o The upward and downward movements in the balance of any specific account can be analyzed
conveniently by looking at one or two pages of the ledger.
o The cumulative effect of a series of transactions on a particular account is readily available
through the ledger.
o The task of auditing the accounting records becomes easier since the ledger accounts would
show clearly which transactions affected their balances.
 General ledger

 A general ledger contains all the accounts – one for each asset, liability, equity, income and
expense that is use in the journalizing process.
 Each account has an assigned account title or account name and an account code or
account number.

 As of a certain chosen date, usually at the end of a month, a trial balance may be prepared from the general ledger in
order to test the equality of the completed entries and postings during the period.
 Forms of Ledger Accounts
T – account form the most common form is similar to a big capital letter T, with a left or debit
side, and a right or credit side.

Accounts Receivables Account No. 1021

Date Explanation PR Dr. Date Explanation PR Cr.

Debit side Credit side

 Running Balance form
Running balance form of ledger account has three money columns: the first column is for the debit postings, the second
column is for the credit postings, while the third shows the running balance of the account.
Account title: Cash Account No:

Date Explanation PR Dr. Cr. Balance

2001
16 1 1 0 0 0 0 0 - 1 0 0 0 0 0 -

16 1 1 2 0 0 0 - 8 8 0 0 0 -

17 1 1 9 5 0 - 8 6 0 5 0 -

18 1 3 0 0 0 - 8 3 0 5 0 -

19 1 2 0 0 0 0 - 1 0 3 0 5 0 -

25 1 1 3 2 5 0 - 1 1 6 3 0 0 -

25 2 6 5 5 0 0 - 5 0 8 0 0 -
 Reliable Repair Shop – General Ledger
Cash Account No. 11

Date Explanation PR Dr. Date 30Explanation PR Cr.

2001
Jun 16 1 1 0 0 0 0 0 - Jun 16 1 1 2 0 0 0 -

19 1 2 0 0 0 0 - 17 1 1 9 5 0 -

25 1 1 3 2 5 0 - 18 1 3 0 0 0 -

26 2 2 5 0 0 - 25 2 6 5 5 0 0 -

30 2 8 0 0 - 27 2 3 0 0 0 -

30 2 1 4 0 0 0 -

30 2 1 0 0 0 0 -
 Accounts Receivable Account No. 13
Date Explanation PR Dr. Date 30Explanation PR Cr.
2001
Jun 25 2 1 8 5 0 0 - Jun 26 2 2 5 0 0 -

Tools Account No. 21

Date Explanation PR Dr. Date 30Explanation PR Cr.

2001
Jun 16 1 1 2 0 0 0 -

Equipment Account No. 23

Date Explanation PR Dr. Date 30Explanation PR Cr.
2001
Jun 17 1 6 5 5 0 0 -
 Accounts Payable Account No. 31
Date Explanation PR Dr. Date 30Explanation PR Cr.
2001 2001
Jun 25 2 6 5 5 0 0 - Jun 17 1 6 5 5 0 0 -

19 1 8 5 0 0 -

Loans payable Account No. 41

Date Explanation PR Dr. Date 30Explanation PR Cr.

- Jun 19 1 2 0 0 0 0 -

Juan de la Cruz, Capital Account No. 23

Date Explanation PR Dr. Date 30Explanation PR Cr.
2001
Jun 16 1 1 0 0 0 0 0 -
 Juan de la Cruz, Drawing Account No. 53
Date Explanation PR Dr. Date 30Explanation PR Cr.
2001
Jun 30 2 1 0 0 0 0 -

Loans payable Account No. 61

Date Explanation PR Dr. Date 30Explanation PR Cr.

2001
Jun 25 1 1 3 2 5 0 -

25 2 1 8 5 0 0 -

Rent revenue Account No. 65

Date Explanation PR Dr. Date 30Explanation PR Cr.
2001
Jun 30 2 8 0 0 -
 Supplies expense Account No. 71
Date Explanation PR Dr. Date 30Explanation PR Cr.
2001
Jun 18 1 3 0 0 0 -

19 8 5 0 0 -

Rent expense Account No. 73

Date Explanation PR Dr. Date 30Explanation PR Cr.

2001
Jun 30 2 1 4 0 0 0 -

Taxes and licenses expense Account No. 75

Date Explanation PR Dr. Date 30Explanation PR Cr.
2001
Jun 17 1 1 9 5 0 -
 Reliable Repair Shop – Sample Ledger Accounts with Temporary Total and
Temporary Balances
Cash Account No. 11
Date Explanation PR Dr. Date 30Explanation PR Cr.
2001
Jun 16 1 1 0 0 0 0 0 - Jun 16 1 1 2 0 0 0 -

19 1 2 0 0 0 0 - 17 1 1 9 5 0 -

25 1 1 3 2 5 0 - 18 1 3 0 0 0 -

26 2 2 5 0 0 - 25 2 6 5 5 0 0 -

30 2 8 0 0 - 27 2 3 0 0 0 -
27,100 1 3 6 5 5 0 30 2 1 4 0 0 0 -
30 2 1 0 0 0 0 -
1 0 9 4 5 0

(2) Temporary debit balance, written in pencil (1) Temporary pencil footings

Ledger accounts of Reliable repair shop: Cash and Accounts payable

 Accounts Payable Account No. 31
Date Explanation PR Dr. Date 30Explanation PR Cr.
2001 2001
Jun 25 2 6 5 5 0 0 - Jun 17 1 6 5 5 0 0 -

19 1 8 5 0 0 -
8,500 7 4 0 0 0

2) Temporary credit
balance, written in pencil 1) Temporary pencil footings
 Charts of Accounts

 Chart of Accounts is an organized and classified list of the account titles and codes that are used in the recording and
classifying process.
 The accounts in the chart are usually arranged in the following order: assets, liabilities, equity, revenues, gains,
expenses, and losses. An example of an account coding system:
o Assets and contra-asset accounts No.1001 to 1999

o Liability and contra-liability accounts No. 2001 to 2999

o Equity, drawing, and summary accounts No. 3001 to 3999

o Income (revenues and gains) accounts No. 4001 to 4999

o Expense (including losses) accounts No. 5001 to 5999

 Charts of Accounts

 The systematic account codes also known as account numbers, would:

o Simplify the recording and classifying processes of an enterprise that uses electronic equipment.
o Facilitate the tracing of accountabilities, and

o Facilitate the sorting and classifying of data.

 Steps in posting entry from Journal to T-form ledger
account
 Destination Ledger Accounts: a debit entry is ported to the debit side of the appropriate ledger account
while a credit entry is posted to the credit side of the proper account.
 Date of the postings: the date of the ledger posting is exactly the same as that of the journal entry, complete date – the
year, month and the day. The subsequent postings on each side of the ledger account would show only the day as the
date of the posting.
 Posting References: to be able to trace the source journal and the destination ledger account of each posting, posting
references are used. Posting references used in the ledger are the initials of the source journal example: “GJ3”,
would mean General Journal page 3.
 Cont…

 The posting reference used in the journal is the code of the destination ledger account. The present of a
code under the PR columns of the journal is an indication that the amount had been posted. If the codes
are not available, a small check (√) may be used to indicate that the posting of that amount is complete.
 If the two-column general journal is being used, the number of postings to the general
ledger is as many as the account titles in the journal entry.
 Other Books of Accounts

 Trial Balance

 It is a built-in accounting device that is prepared as of a certain date usually at the end of a month, to
test the equality of the debt and credit balances of the ledger accounts after completing the journal
entered and ledger postings.
 It is the control tool that helps find certain clerical errors committed in the recording
and posting processes.
 Forms of Trial Balances

1. Unadjusted
2. Adjusted or post-closing trial balance (depending on when it is prepared).

Steps of trial balance

 The computation of the balances of the general ledger accounts.

 The actual preparation of the trial balance.
 Computing for the balance of ledger account
 Balance of an account as of a certain date is the difference between the total debit posting and
the total credit postings made to that particular account.
 The balance may be computed at any time as long as the journal entries are
already posted.
 Sub-steps in determining balance of a ledger
account
1. Foot the debit money column and the credit money column of each ledger account.
 it is not necessary to draw single lines to indicate the process of additions since only temporary total are needed at this
point. Temporary totals called pencil footings, are written in a very small figures.
 if a money column has only one posting there is no need to foot the column. In this case, the posting itself is
the total of that column.

2. Compute for the temporary balance of each ledger account.

 This balance is the difference between the debit and credit pencil footings of each account. Write the temporary
balance, in very small figures and in pencil, on the side of the ledger account with a larger total, under the
explanation.
 Sub-steps in determining balance of a ledger
account
 If the debit footing is bigger than the credit footing, the account has a temporary debit
balance. If the footing is bigger, the account has a temporary credit balance.

 If the debit and credit footings are equal, the account has no balance or is zero balance.

 An account without any posting has no balance or is zero balance.

 If a ledger account has only one posting, that posting is the balance of the account.

 If a ledger account has postings on one side only, then the total of that side is the balance
of the account.
Trial Balance topic to be continued in Chapter 11.
 Other Journal Sample
Date Account title and Explanation Ref. Debit
Credit

2016

Jan. 1 Cash 101 200,000

Shayne, Capital 301 200,000

Owner’s investment of cash in the business

Jan. 2 Property, Plant & Equipment 140 50,000

Shayne, Capital 301 50,000

Owner’s investment of equipment in the business

Jan.3 Inventory 121 20500

Cash 101 20500

Purchase of inventories from supplier through cash

Date Account title and Explanation Ref. Debit Credit
2016

Jan. 4 Accounts Receivable 111 50,000

Sales 400 50,000

Sale of inventories to customer on account

Cost of Goods Sold 500 15,000

Inventory 121 15,000

Sale of Inventories to customer

Jan.8 Inventory 121 40,000

Accounts Payable 201 40,000

Purchase of inventories from supplier on account

Jan. 12 Cash 101 60,000

Sales 400 60,000

Sale of inventories to customer

Date Account title and Explanation Ref. Debit Credit

2016

Jan.14 Cash 101 24,000

Accounts Receivable 111 24,000

Collection of customer’s accounts receivable

Jan.15 Sales Return 401 5,000

Accounts Receivable 111 5,000

Return of merchandise from customer

Inventory 121 1,500

Cost of Goods Sold 201 1,500

Return of merchandise from customer

Jan. 25 Shayne, Drawing 302 2,000

Cash 101 2,000

Withdrawal of cash from the business for her personal use

Jan.31 Salaries expense 505 5,000

Cash 101 5,000

Paid salaries to employees for the month

 her Ledger Sample
No.101
CASH

Date Explanation Ref. Debit Credit Balance

2015

Jan. 1 Investment of Capital by owner J1 200,000 200,000

3 Purchase of inventories from supplier J1 20,500 179,500

12 Sale of inventories to customer J1 60,000 239,500

14 Collection of customer’s accounts receivable J1 24,000 263,500

25 Payment of accounts payable to supplier J1 10,000 253,500

30 Withdrawal of cash from the business J1 2,000 251,500

31 Paid salaries to employees for the month J1 5,000 246,500

Balance 246,500
 ACCOUNTS RECEIVABLE No.111

Date Explanation Ref. Debit Credit Balance

2015

Jan. 4 Sales inventories to customer on account J1 50,000 50,000

14 Collection of customer’s accounts receivable J1 24,000 26,000

15 Return of merchandise from customer J1 5,000 21,000

31 Balance 21,000
 INVENTORY No.121

Date Explanation Ref. Debit Credit Balance

2015

Jan. 3 Purchase of inventories from supplier through cash J1 20,500 20,500

4 Sale of inventories to customer J1 15,000 5,500

8 Purchase of Inventories from supplier on account J1 40,000 45,500

12 Sale of inventories to customer J1 18,000 27,500

15 Return of merchandise from customer J1 1,500 29,000

31 Balance J1 29,000
 PROPERTY, PLANT & EQUIPMENT No.140

Date Explanation Ref. Debit Credit Balance

2015

Jan. 2 Purchase of inventories from supplier through cash J1 50,000 50,000

31 Balance 50,000
 ACCOUNTS PAYABLE No.201

Date Explanation Ref. Debit Credit Balance

2015

Jan. 8 Purchase of inventories from supplier on accounts J1 40,000 40,000

25 Payment of accounts payable to supplier J1 10,000 30,000

31 Balance 30,000
 SHAYNE, CAPITAL No.301

Date Explanation Ref. Debit Credit Balance

2015

Jan. 1 Purchase of inventories from supplier through cash J1 200,000 200,000

2 Sale of inventories to customer J1 50,000 250,000

31 Balance J1 250,000
 SHAYNE, DRAWING No.302

Date Explanation Ref. Debit Credit Balance

2015

Jan. 30 Purchase of inventories from supplier through cash J1 2,000 2,000

31 Balance 2,000

SALES No.400
Date Ref. Debit
Explanation Credit Balance
2015
Jan. 4 Sale of inventories to customer on account Sale of J1
50,000
12 inventories to customer J1 50,000
110,000
31 Balance 60,000
110,000
 COST OF GOODS SOLD No. 500
Date Explanation Ref. Debit Credit Balance

2015

Jan. 4 Sale of inventories to customer J1 15,000 15,000

12 Sale of inventories to customer J1 18,000 33,000

15 Return of merchandise from customer J1 1,500 31,500

31 Balance 31,500

SALARIES EXPENSE No. 405

Date Explanation Ref. Debit Credit Balance

2015

Jan. 31 Paid salaries to employees for the month J1 5,000 5,000

31 Balance 5,000
 Special Journal

 Transactions of small businesses such as sari-sari stores are often a few, and as such, journalizing the general journal
is enough. Large companies, however, often engage in hundreds of transactions each day. In order to expedite the
journalizing process, a company usually utilizes special journals in additions to the general journal. Special journals
are used to record typical and similar types of transactions. The number of special journals managed by a company
is dependent on the types of transactions that occur frequently. For example, merchandising companies usually
have numerous recurring sales of merchandise account or purchases of supplies on account. Thus, these companies
can adopt two additional special journals.
Special Journal Purpose
Sales Journal Used in journalizing all sales of
merchandise on account
Cash receipts journal Used in journalizing all cash received
(including cash sales)

Purchases Journal Used in journalizing all purchases of

merchandise on account
Cash Payments journal Used in journalizing all cash paid
(including cash purchases)
 Sales Journal Sample

1 SALES JOURNAL 2 51
Date Account Debited Invoice Ref. Dr. Accounts Receivable Cr.
3 4 No. 6
5 Sales 7
2015
Mar. 1 Castro Inc. 101 ∕ 200,000

5 Esguerra & Co. 102 ∕ 650,000

12 Rosuman Corp. 103 ∕ 340,000

20 Lugtu, Inc. 104 ∕ 630,000

25 KSLC General Partnership 105 ∕ 345,000

26 EMR & Co. 106 ∕ 856,000

31 Reginald and Joseph’s Sari-Sari Store 107 ∕ 452,000

1. Special Journal Title The name of the special journal – Sales Journal.

2. Special Journal Reference Number Reference number of the special journal that is used during posting to the ledgers.

3. Date. The date at which the transaction occurred.

4. Account Debited Each of the company’s individual customers is shown. This will be helpful during
the posting process to the subsidiary ledgers.
5. Invoice number Pre-numbered invoices ensure that all invoices transactions are journalized.

6. Reference A check mark is inputted under this column when posting are made in the ledger. This is ensure
all transactions are posted and, at the same time, to prevent double postings.

7. Dr. Accounts receivable, Cr. Sales Since all transactions in each special journal are of the same type, explanations of transactions
in each journal entry are eliminated. In our example, it is shown that all the transactions
inputted in the sales journal include a debit to accounts receivable and a credit to sales, Under
this columns the respective amount of each transaction are entered.

8. Total. At the end of each month, the total is computed. This will then be posted to the general ledger
rather than the individual entries. This saves time and, at the same time, reduces the possibilities
of errors in posting.
Cash Receipts Journal
7

CASH RECEIPTS JOURNAL CR1 2

Date Account Credited Ref Dr. Cash Cr. Accounts Cr. Sales Cr. Other
3 4 Receivable Accounts
5 6
3

2015

Mar 1 Krystel, Capital 200,000 200,000

2 Rosuman, Corp. 750,000 750,000

6 KSLC General 30,000 30,000

Partnership
30 CastroCute & Co. 25,000 25,000

1,005,000 30,000 775,000 200,000

8
1. Special Journal Title The name of the special journal – Cash Receipts Journal.

2. Special Journal Reference Number. Reference number of the special journal that is used during posting to the ledgers.

3. Date. The date t which the transaction occurred.

4. Account Credited The account that is credited with reference to the chart, of accounts.

5 Reference It is left back upon journalizing and is filled out during the posting process. A check mark is
inputted under this column when postings are made in the ledger.

6 Dr. Cash The corresponding amount of cash debited is entered.

7 Cr. Accounts Receivable, Sales, Other The respective amount credited is entered.
Accounts.
8 Totals These will be posted to the general ledger rather than the individual entries.
Purchase Journal

PURCHASES JOURNAL 2 P1
1
Date Account Credited Terms Ref Dr. Merchandise
4 5 6 Inventory, Cr. Accounts
3 Payable 7

Mar 3 Rachel and Ross Merchandising 2/10, n/30 213 20,000

4 ChanTheMan Inc. 4/15, n/30 203 10,000

8 Monicuh Corp. 1/20, n/30 206 5,500

25 PheebsSleeves Inc. 2/10, n/30 214 21,000

26 Joey Tribianni Co. 5/15, n/30 207 12,000

28 Gunther Inc. 3/10, n/30 216 9,000

8 77,500
1. Special Journal Title The name of the special journal – Cash Purchases Journal.

2. Special Journal Reference Number Reference number of the special journal that is used during posting to the ledgers.

3. Date The date at which the transaction occurred.

4. Account Credited The account that is credited with reference to the chart, of accounts.

5 Terms Suppliers usually provide discounts on its regular customers. The payment terms include the
discount rate, discount period, and payment. For example, “2/10, n/30” indicates a 2% discount if
paid within 10 days; otherwise, the payment should be made within 30 days.

6 Reference This column is left blank upon journalizing and is filled out with a check during the posting
process to ensure all transactions are posted and to eliminate double postings to the ledger.

7 Dr. Merchandise Inventory, Cr. Accounts The purchase journal contains all purchases on account. All the transactions inputted in the
payable purchases journal include a debit to Merchandise inventory and a credit Accounts payable.
Under this column, the respective amounts of each transaction are entered.

8 Total At the end of each month, the total is computed. This will then be posted to the general ledger
rather than the individual entries. This saves time and, at the same time, reduces the possibilities
of errors in posting.
Cash Payments Journal
7

CASH RECEIPTS JOURNAL CP1 2

Date Check Account Credited Ref Dr. Accounts Dr. Other Cr. Cash
3 No. Payable Accounts
5 6 8
4 7

2015

Mar 1 1071 Walter White Ltd. 40,000 40,000

2 1072 PinkMan Corp. 34,000 34,000

4 1073 Walter Junior Inc. 28,000 28,000

7 1074 Property, Plant & 120,000 120,000

Equip.
19 1076 Supplies Expense 45,000 45,000

20 1077 Merchandise 23,000 23,000

inventory
102,000 188,000 290,000

9
1. Special Journal Title The name of the special journal – Cash Payments Journal

2. Special Journal Reference Number Reference number of the special journal that is used during posting to the ledgers.

3. Date The date at which the transaction occurred.

4. Check No. The corresponding check number of each cash payment are recorded to maintain a record of the
disbursed checks.
5 Account Debited The account that is debited.

6 Reference This column is left blank upon journalizing and is filled out with a check during the posting
process to ensure all transactions are posted and to eliminate double posting to the ledger.

7 Dr. Accounts payable, Other Accounts The respective amount debited is entered.

8 Cr. Cash The corresponding amount of Cash credited is entered.

9 Totals These will be posted to the general ledger rather than individual entries.
 Subsidiary Ledgers

 A subsidiary ledger is a group of accounts with a similar characteristics (e.g. accounts receivable and
accounts payable). It is an additional record to the general ledger utilized by the company to track the
per-individual accounts of the company’s customers, creditors, and the like. The relationship of the
subsidiary ledger with the general ledger is described as follows.
Subsidiary Ledger Purpose
Accounts Receivable ledger Used in tracking individual accounts
receivable balances of company’s customers.

Accounts payable ledger Used in tracking individual accounts payable

balances of company’s creditors
Accounts Receivable Subsidiary Ledger

Landbabes & Co.

Date Ref Debit Credit Balance

2015
Mar 5 J1 40,000 40,000

10 J1 60,000 100,000

31 J1 20,000 800,000

Jowsie & Co.

Date Ref Debit Credit Balance

2015
Mar 1 J1 33,000 33,000

4 J1 47,000 80,000

29 J1 24,000 104,000

31 J1 85,000 19,000
Accounts Receivable Subsidiary Ledger

Ryanbear & Co.

Date Ref Debit Credit Balance

2015
Mar 9 J1 80,000 80,000

17 J1 30,000 50,000

31 J1 50,000 0

The accounts receivable subsidiary ledger is as the sale from general ledger. The only difference is
accounts receivable subsidiary ledger provides a running balance of each of the company’s customers
on credit .
Accounts Payable Subsidiary Ledger

TedSchmosby Inc.

Date Ref Debit Credit Balance

2015
Mar 1 J1 20,000 20,000

16 J1 30,000 30,000

27 J1 15,000 35,000

31 J1 10,000 25,000

Scherbatsky Ltd.

Date Ref Debit Credit Balance

2015
Mar 5 J1 10,000 10,000
6 J1 25,000 35,000

7 J1 30,000 65,000

19 J1 50,000 115,000
Accounts Payable Subsidiary Ledger

Barney WaitForlt Stinson & Co.

Date Ref Debit Credit Balance

2015
Mar 6 J1 5,000 5,000

21 J1 3,000 2,000

22 J1 2,000 0

23 J1 20,000 20,000

Accounts payable ledger same as the accounts receivable subsidiary ledger

provides a running balance of each of the company’s suppliers or creditors.
 Sample Exercises

 Miami & Co. distribute school and office supplies. Transactions with customers are paid with cash or check only. Miami transacts with three
major customers that have established accounts. These approved customers routinely buy on credit.

 The following information for June regarding each of the credit customers:

Customer 1 Beg. Balance, P30000. Purchases on account on June 5, P14000. Payment on account on June 17, P10000.

Customer 2 Beg. Balance, P15000. Purchase on account on June 15, P76000. Payment on account on June 26, P50000.

Customer 3 Beg. Balance, P0. Purchase on account on June 9, P85000.

a) Prepare a subsidiary accounts receivable ledger account for each of Miami & Co. customers.
 Answers

Customer 1
Accounts Receivable Subsidiary Ledger
Date Ref Debit Credit Balance
2015
June 1 30,000 30,000
5 14,000 44,000
17 10,000 34,000

Customer 2
Date Ref Debit Credit Balance
2015
June 1 15,000 15,000
15 76,000 91,000
26 50,000 41,000
 Answers

Customer 1
Date Ref Debit Credit Balance
2015
June 1
9 85,000 85,000
 Answers
b) Prepare the general ledger accounts receivable “control” account. Be sure the total in this account
reconciles to the sum of the individual balances in the subsidiary ledgers.

Accounts Receivable (GL)

Date Explanation Ref Debit Credit Balance
2015
June 1 Beginning balance J1 45,000 45,000
5 Customer 1 purchase on account J1 14,000 59,000
9 Customer 3 purchases on account J1 85,000 144,000

15 Customer 2 purchases on account J1 76,000 220,000

17 Payment on account of customer 1 J1 10,000 210,000

26 Payment on account of customer 2 J1 50,000 180,000

The sum of the individual accounts balances should be equal to final balance in the general ledger. P160000 = 34000 + 41000 +85000
P160000 =P160000
 THE END

References:

Kimwell, M.B., “Fundamentals of Accounting”

Manuel, Z.C “Accounting Process, Basic Concepts and Procedures, Int’l Ed.”