FUNDAMENTALS OF ACCOUNTANCY,

BUSINESS AND MANAGEMENT 1

Books of Accounts
Quarter 3, Module 4
(Week 5)
Fundamentals of Accountancy, Business and Management 1
Senior High School
Locally-Developed Module
Quarter 3-Module 4: Books of Accounts
First Edition, 2021

All rights reserved. No part of this module may be reproduced or

transmitted to any form or by any means, electronic or mechanical,
including photocopying, recording, or by any information storage and
retrieval system without written permission from the publisher and
authors.
Published by the Schools Division Office (SDO) Dagupan City
OIC, Schools Division Superintendent: Aguedo C. Fernandez
OIC, Asst Schools Division Superintendent: Ma. Criselda G. Ocang

Development Team of the Module

Writer: Jacqueline G. Melendez
Editor: Pina T. Cochangco
Reviewer: Pina T. Cochangco
Renata G. Rovillos
Layout Artist: _______________
Management Team: Venus Maria SM. Estonilo
Maria Linda R. Ventenilla
Renata G. Rovillos
Cherry A. Cayabyab

Department of Education-SDO Dagupan City

Office Address: Burgos Street, Poblacion Oeste, Dagupan City
Telefax: (075) 515-6009
E-mail Address: [email protected]
 BOOKS OF ACCOUNTS
Andres, C.S., et al. (2016)” Teaching Guide for Senior High School
Fundamentals of Accountancy, Business and Management 1” – This module was written for you to accomplish at home. It
Published by Commission on Higher Education in collaboration with was carefully designed so that you can work at your own pace and
the Philippine Normal University allow self-discovery of the concept through activities that you will
perform. Activities were also selected to allow independent learning
Ferrer R.C. et.al. (2017). Fundamentals of Accountancy, Business which also aims to develop students’ reading comprehension skills
and Management part 1, Bandolin Enterprise, (Publishing and Print- through understanding written texts.
ing) Bakakeng Sur, Baguio City In this module you will learn to:
Tugas F.C et.al. (2016). Fundamentals of Accountancy, Business 1. Illustrate the format of a general and special journals.
and Management part 1, Vibal Group Inc., Araneta venue, Quezon ABM_FABM11- IIIf-23
City 2. Illustrate the format of a general and subsidiary ledgers.
ABM_FABM11- IIIf-24
To further understand the lessons kindly visit:
https://www.youtube.com/playlist?list=PLGxEv9ADBII1GQs-
abQLD5rgsMuuwVHgD

In doing this module, please follow

these reminders…
1. Take the pretest before working
or answering the module.
2. Perform the activities as
PREPARED BY: suggested.
3. Answer all the exercises.
4. Check your answers against the
JACQUELINE G. MELENDEZ Key to Correction.
Teacher III 5. Take the Post Test.
Dagupan City National High School, Senior High School

21 1
Directions: Identify the term/s being described. Write your answer Discuss the following questions in your own words in a short
on the space provided. essay format.

_______________1. This refers to the specific ledger account 1. Differentiate General Journal from a General Ledger.10 points
which is supported be detailed information in 2. Differentiate General Ledger from a Subsidiary Ledger.
the subsidiary ledger. 10 points
_______________2. This is a journal used to record all cash
3. Why do companies use special journals? 10 points
receipts from whatever source.
_______________3. This is a journal used to record all other 4. Illustrate the format of a general journal being used by an actual
transactions which cannot be recorded in a business. (Note: The data may be gathered either personally or
special journal. using the internet or other textbooks.) 10 points
_______________4. This is also known as the book of original
5. Compare and contrast the formats of the special journals and
entry.
general ledger of an actual business with those discussed in the
_______________5. This shows information on which customer
module. 10 points
owes the business and how much.
_______________6. This is a journal used to record recurring
transactions. Rubrics in Checking Essays: Content = 30%, Understanding/Application = 25%,
_______________7. This is a journal used to record transactions Original Thinking = 25%, Structure = 10% and Grammar = 10%.
involving payment of cash for whatever
purpose.
_______________8. This is the basis for the account number in
the general ledger.
_______________9. This is also known as the book of final entry.
_______________10. This is the order of recording transactions
in a journal

*Source: Tugas F.C et.al. (2016). Fundamentals of Accountancy, Business and

Management part 1, Vibal Group Inc., Araneta venue, Quezon City

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 Acitivity #2
A. Directions: Identify what special journal that is applicable for the
following transactions. Write your answer on the space provided.
_____________1. Collected ₱10,000 from a customer in payment of Before we proceed on this module, kindly recall the topics
his account. discussed already: Accounting Definition, Nature and History,
_____________2. Bought 100 pieces of mugs to be sold in the store Users of Accounting Information, Concepts and Principles of Ac-
amounting to ₱1,500 on account. counting and the last was Accounting Equation. Let us summarize
_____________3. Sold five pieces of mugs to X, ₱320 cash. the elements that discussed on last module.
_____________4. Sold two pieces of mugs to Y, ₱112 cash
_____________5. Purchased office supplies for cash, ₱500  The basic accounting equation is Assets = Liabilities + Equity.
_____________6. Paid ₱20,000 monthly rental.  Assets are resources controlled by an entity resulting from
_____________7. Paid salary of staff, ₱15,000. past events and are expected to provide inflows of future eco-
_____________8. Sold 100 pieces of mugs to Unicup, Inc., ₱5,600 nomic benefits.
on account.  Liabilities are present obligations of an entity resulting from
_____________9. Sold 500 pieces of mugs to Bugsmore Corp. for past events and are expected to cause outflows of future
₱15,300 payable one month after delivery. economic benefits.
_____________10. Purchase on account 1,000 pieces of mugs for  Equity is computed as assets minus liabilities
₱12,400  The expanded accounting equation is:
Assets = Liabilities + Equity + income – Expenses.
 Income is increase in economic benefits during the accounting
Activity #3 period in the form of inflows or enhancements of assets or
REFLECTIVE LEARNING: decreases of liabilities that result in increases in equity
“Accounting is the process of IDENTIFYING, RECORDING, participants.
and COMMUNICATING economic events of an organization to  Expenses are decreases in economic benefits during the
interested users.” accounting period in the form of outflows or depletions of as-
1. From the definition, where do we record the transactions that we sets or incurrences of liabilities that result in decreases in eq-
have identified? uity, other than those relating to distributions to equity partici-
2. What are the tools that we use to document these transactions? pants.
3. How important are these records in accounting?
If those topics were clear, you may proceed. Enjoy reading
and analyzing.
Rubrics in Checking Essays: Content = 30%, Understanding/Application = 25%,
Original Thinking = 25%, Structure = 10% and Grammar = 10%.

*Source:
Andres, C.S., et al. (2016)” Teaching Guide for Senior High School Fundamentals of Accountancy, Business and
Management 1” – Published by Commission on Higher Education in collaboration with the Philippine Normal University

18 3
 BOOKS OF ACCOUNTS Acitivity #1
Direction: Write “J” if the statement refers to the use of a journal
Books of accounts are accounting records in which all and “L” if it refers to the use of the ledger. Write your answer on
business transactions are maintained on a regular basis. They are the space provided.
used to record and classify business transactions and from where _____1. it provides information about the financial status of the
statements are prepared. business.
The basic accounting records used by a business to track _____2. it ensures that double-entry bookkeeping system is
the history of its business transactions are: observed when recording transactions.
• Journals (general; special) _____3. It provides more reliable evidence of transactions.
• Ledgers (general; subsidiary) _____4. It assists in tracking the flow of business transactions for a
given period of time.
All business transactions are first recorded in a journal by a _____5. It provides adequate explanation of each entry.
_____6. It assists management in monitoring business
process called journalizing. The format and design of journals may
performance.
vary in style and content form from one business to another.
_____7. It provides a systematic record of transactions.
_____8. It presents necessary information about the transactions.
THE JOURNAL
_____9. It provides information about the results of business
A journal function as a financial diary. It is used to record
operations.
chronologically all business transactions as they occur. Since the
_____10. It shows detailed information about specific assets,
journal is the accounting record in which business transactions are liabilities and owner’s equity of the business.
recorded, it is commonly referred to as the book of original entry.
The use of a journal provides the following advantages: *Source: Tugas F.C et.al. (2016). Fundamentals of Accountancy, Business and
1. It provides a systematic and chronological transactions record; Management part 1, Vibal Group Inc., Araneta venue, Quezon City
2. It simplifies the ledger due to some details in the journal need
not be written in the ledger;
3. It offers an appropriate description of each entry and provides
the relevant details on transactions such as the debited and
credited accounts and related amounts.;
4. It ensures that the double-entry bookkeeping system is ob-
served when recording transaction; and
5. It helps to address business misunderstandings because it acts
as documentation and legal proof of transactions.

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 There are two types of journals, the general journal and the
special journals.

The General Journal

 Books of accounts are accounting records in which all busi- The general journal is the most basic journal. The journal
ness transactions are maintained on a regular basis. makes several significant contributions to the process of recording:
 The basic accounting records used by a business to document 1. It discloses the full results of a transaction in one location.
the history of its business transactions are: Journals (general; 2. It provides a chronological record of transactions.
special) and Ledgers (general; subsidiary) 3. It helps to prevent or locate errors because the debit and credit
 All business transactions are first recorded in a journal by a amounts for each entry can be easily compared.
process called journalizing.
 A journal is commonly referred to as the book of original en- An example of a general journal is shown below.
try
 There are two types of journals, the general journal and the
special journals.
 An entry that requires three or more accounts is a compound
entry
 Sales Journal (Sales on Account Journal) – used to record all The general journal (two-column journal) is used to record
sales on credit (on account) the following types of entries:
 Cash Receipts Journal – used to record all cash that has 1. Entries is to record transaction which have not been pro-
been received vided for in the special journals.
 Purchase Journal (Purchase on Account Journal) – used to 2. Correcting entries. These are any entries to correct
record all purchases of inventory on credit (or on account) previous entries which were incorrect.
 Cash Disbursements Journal – used to record all 3. Adjusting entries. These are end-of-month entries made to
transactions involving cash payments comply with the matching principle in which expenses incurred
 There are two kinds of ledgers, namely; the general ledger during the accounting period are matched with the revenue
and the subsidiary ledgers. generated during the same period.
 The General Ledger is a controlling account because it sum- 4. Reversing entries. These are beginning-of-month entries that
marizes all the activities that have taken place as recorded in are required on certain types of adjusting entries recorded in the
its subsidiary ledger previous month.
 A subsidiary ledger is a separate ledger that provides the 5. Closing entries. These are entries at the end of the year that
supporting detail of an account in the general ledger set the revenue, expenses and temporary contra-equity
 The two most common types of subsidiary ledgers are: accounts (such as withdrawals) to zero. Closing entries are
Accounts receivable subsidiary ledger and Accounts intended to clear these records for the next accounting cycle.

16 5
Journalizing process Daily business transactions are initially recorded in journals.
Entering transaction data in the journal is referred to as Information is later transferred from these journals to the general
journalizing. Companies make separate journal entries for each ledger accounts by the process of posting, which is generally
transaction. A complete entry consists of: preferred at the end of the month.
1. The date of the transaction which is written in the Date col-
umn. Posting to Accounts Receivable Subsidiary Ledgers
2. The debit account title (that is, the account to be debited) (Refer to SALES JOURNAL and CASH RECEIPTS JOURNAL)
which is written first at the extreme left margin of the column
headed “Account Titles and Explanation,” and in the Debit col-
umn the amount of the debit is recorded.
3. The credit account title (that is, the account to be credited)
which is indented and written on the next line in the column
headed “Account Titles and Explanation,” and in the Credit col-
umn the amount of the credit is recorded.
4. A brief explanation of the transaction which is written on the
line below the credit account title. A space is left between jour-
nal entries. The blank space distinguishes individual journal
entries and makes it easier to read the whole journal.
Posting to Accounts Payable Subsidiary Ledgers
5. The column titled Ref. (stands for Reference), which when the
(Refer to PURCHASE JOURNAL and CASH PAYMENT
journal entry is made, is left blank. This column is used later
JOURNAL)
when the journal entries are transferred to the accounts in the
ledger.

Let us use the following transactions as an illustration to

explain the documentation of transactions in the general journal:
 June 1, 2020 Mr. Ben Fabia invested ₱ 500,000.00 in a
restaurant business by opening an account with Mega Bank.
 June 5, 2020 purchased kitchen appliances for his business
amounting to ₱ 100,000.00 by issuing a check.
 June 6, 2020 started his operations a made a sales for that day
amounting to ₱ 20,000.00

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The Subsidiary Ledger We will now record the transactions in the general journal.
A subsidiary ledger is a separate ledger that provides the
supporting detail of an account in the 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.
The two most common types of subsidiary ledgers are as
follows:
1. Accounts Receivable Subsidiary Ledger

The accounts receivable subsidiary ledger provides detailed An entry like these are known as simple entry. However,
information on amounts due the business from its customers. some transactions require more than two accounts in journalizing.
This information is usually arranged alphabetically by customer One compound entry is an entry that involves three or more ac-
and chronologically by invoice within each customer category. counts. The transactions in the examples above are all simple en-
The total of all the customers’ balances must agree with the tries. The following is an example of a compound entry:
balance of the Accounts Receivable account in the general  On June 7, 2020, Mr. Fabia purchased a motorcycle costing
ledger which is called a control account. ₱ 80,000.00. He pays ₱ 30,000.00 cash and agrees to pay the
remaining ₱ 50,000.00 on account (to be paid later).
2. Accounts Payable Subsidiary Ledger
The compound entry is as follows:

The accounts payable subsidiary ledger provides detailed

information about amounts owed by the business to its
suppliers. This information is arranged alphabetically by ven-
dor and chronologically by invoice within each vendor account.
The accounts payable subsidiary ledger is also referred to as
the creditors’ ledger.

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The Special Journals
A special journal is a multi-column journal which may be
custom-designed by an accountant according to the special needs of
a business.
The objective of the special-purpose journals is to facilitate
the recording of recurring transactions by not requiring respective
entries of the same account names and numbers in the journal.
The following are the commonly used special journals:
1. Sales Journal (Sales on Account Journal) – used to record all
sales on credit (on account)
2. Cash Receipts Journal – used to record all cash that has been
received
3. Purchase Journal (Purchase on Account Journal) – used to rec-
ord all purchases of inventory on credit (or on account)
4. Cash Disbursements Journal – used to record all transactions
involving cash payments

Sales Journal - is a special journal used to record only the sale of

merchandise on account. This is typically used by merchandising The account in the general ledger are arranged according to their
businesses which have many credit sales transactions. Only sequence in the chart of accounts. The updated ledger ac-
transactions which involve a debit to Accounts Receivable and a counts, in turn, serve as the basis for preparing the balance sheet
credit to Sales are recorded in this journal. The source document and other financial statements.
for this journal is the charge invoice or sales invoice (for credit
transactions) to various customers or clients.
To record Sales on Account, the June sales transactions (all
subject to value added tax) are as follows:

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THE LEDGER
The ledger refers to the accounting book in which the
accounts and their related amounts as recorded in the journal are Cash Receipts Journal – this is a special journal used to record
posted periodically. The ledger is also called the ‘book of final all transactions in which cash receipts are cash sales and
entry’ because all the balances in the ledger are used in the collection from customers. The source document for this journal
preparation of financial statements. This is also referred to as the is the Official Receipts or Cash Receipts issued by the business.
T-Account because the basic form of a ledger is like the letter ‘T’. The exact form and number of special amount columns will vary
There are two kinds of ledgers, namely; the general ledger depending upon business’s needs.
and the subsidiary ledgers. To record Cash Receipts transactions, the June cash
receipts transactions are as follows:
The General Ledger
The general ledger (commonly referred by accounting pro-
fessionals as GL) is a grouping of all accounts used in the prepara-
tion of financial statements. The GL is a controlling account be-
cause it summarizes all the activities that have taken place as
recorded in its subsidiary ledger. The format of a general ledger is
shown:

12 9
Purchases Journal – is a journal used to record purchases of
merchandise on credit or on account. The source documents for Cash Disbursements Journal – or sometimes known as the cash
purchase journal are the invoices from the supplier of the company. payments journal. This is a special journal used to record all
To record Purchases of Items on Account, the June transactions in which cash is paid out or decreased. The exact form
purchases transactions (all subject to value added tax) are as fol- and number or special amount columns will vary depending upon
lows: the business’s needs.
To record, the July cash transactions are as follows:

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