BOOKKEEPING

CHAPTER 11

MS. JACEL D. GADON

BOOKKEEPING
WHAT I KNOW?
2022 BOOKKEEPING 3
1. A
2. D
3. B
4. C
5. D
6. A
7. A
8. B
9. B
10. A
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JOURNAL VS. LEDGER

• Journals and ledgers are where
business transactions are recorded in
an accounting system. In essence, detail-level
information for individual transactions is stored in
one of several possible journals, while the
information in the journals is then summarized and
transferred (or posted) to a ledger. 

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WHAT ARE THE DIFFERENCE BETWEEN THE TWO?

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• JOURNAL
A journal is a chronological record of all company’s
transactions listed by date. It is often referred to as
the book of original entry.
The recording of financial information into the
journal is called journalizing.

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Journal Entries
Date – The date at which the transaction occurred.
Account Titles and Explanation – is the unique name assigned
to an account in an accounting system. An account title is
essential when the accounting staff needs to identify an account,
since the title conveys the purpose of the account. 
Reference Number – A folio number is a reference number used
in accounting to uniquely identify an entry in a journal or ledger.
The number may be numeric or alphanumeric. The Ref column is
left blank during the journalizing process and is filled out during
the posting process.
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Journal Entries
Debit - accounting entry that either increases
an asset or expense account, or decreases
a liability or equity account. It is positioned to the left in
an accounting entry.
Credit – accounting entry that either increases a
liability or equity account, or decreases an asset or
expense account. It is positioned to the right in an
accounting entry.

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The Rules of Debit and Credit In the process of journalizing business
transactions, the rules of Debit and Credit are essential to ensure
accurate recording and sound decision making.
Debit is abbreviated as DR while CR for Credit.
Further, it is deemed a requirement that the bookkeeper should be able
to master the normal balance of each account title being used in the
process of recording. The following steps will be undertaken in
determining account balances for every account title such as cash,
account receivable, etc.:
1. Add all the debit side to generate total debit
2. Add all the credit side to generate total credit.
3. Subtract total debit to the total credit.
4. Determine the balance of each account.
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 LEDGER
• A ledger account contains a record of business
transactions. It is a separate record within
the general ledger that is assigned to a specific
asset, liability, equity item, revenue type, or
expense type. 

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Ledger accounts
Ref. Balance Sheet Accounts Balance Sheet Accounts
(Assets) (Liability)
110 Cash 210 Notes Payable
120 Accounts Receivables 220 Accounts Payable
130 Supplies 230 Salaries Payable
140 Prepaid Rent 240 Utilities Payable
150 Prepaid Insurance 250 Interest Payable
160 Service Vehicle 260 Unearned Referral Revenues
170 Accumulated Depreciation Balance Sheet Accounts (Equity)
175 Equipment 310 Capital
180 Inventories 320 Withdrawals
330 Revenue
Ledger accounts
Ref. Income Statement Accounts
(Income)

410 Consulting Revenues

420 Referral Revenues
(Expenses) EXPENSES
510 Salaries Expense 560 Depreciation Expense – Vehicle
520 Supplies Expense 570 Depreciation Expense – Office
Equipment
530 Rent Expense 580 Miscellaneous Expense
540 Insurance Expense 590 Interest Expense
 Difference Between Journal and Ledger
JOURNAL LEDGER

Each transaction leads to a pair Ledger is organized by account

of journal entries: A debit to
one account and an equal
offsetting credit in another.
JOURNAL VERSUS LEDGER

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LAND debit
WITHDRAWALS credit
SALES REVENUE credit
ACCOUNTS PAYABLE credit ACCOUNTS LISTED IN DEBIT
AND CREDIT SIDE

SALARY EXPENSE debit

CASH debit
CAPITAL credit
EQUIPMENT debit
THE FIVE ELEMENTS OF
BOOKKEEPING
•ASSET
•LIABILITY
•OWNER’S EQUITY
•REVENUE
•EXPENSES
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 ASSET
• It is the first account of the five major accounts which refers
to resources with economic value that an individual,
corporation, or country owns or controls with the expectation
that it will provide a future benefit. An asset represents an
economic resource for a company or represents access that
other individuals or firms do not have. An economic resource
is something that is scarce and has the ability to produce
economic benefit by generating cash inflows or decreasing
cash outflows.

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 LIABILITY
• It is the second account of the five major accounts which refers
to something a person or company owes, usually a sum of
money. Liabilities are settled over time through the transfer of
economic benefits including money, goods, or services.
Liabilities include loans, accounts payable, mortgages,
deferred revenues, and accrued expenses. In general, a liability
is an obligation between one party and another not yet
completed or paid for.

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 OWNER’S EQUITY
• It is the third account of the five major accounts
which refers to as shareholders' equity (or owner’s
equity for privately held companies). Owner’s equity
is a degree of residual ownership in a firm or asset
after subtracting all liabilities associated with that
asset.

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 REVENUE
• It is the fourth account of the five major
accounts which refers to money brought into a
company by its business activities. Revenue is
commonly known as service income or fees,
sales, and sales discount.

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 EXPENSES
• It is the fifth and last account of the five major accounts
which refers to the cost of operations that a company
incurs to generate revenue. Common expenses include
payments to suppliers, employee wages, factory leases,
and equipment depreciation.

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DEBIT CREDIT

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TRIAL BALANCE
• Trial balance is a list of all ledger accounts with closed or
final balances on a certain period arranged according to the
assets, liabilities, capital, revenue and expense. The debit
and credit columns must be equal in total amount. This is the
first report prior to financial statement preparation.

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JOURNAL
SEPTEMBER 1, 2018 - KATE INVESTED P280, 000 CASH

Date Account Titles and Ref Debit Credit

Explanation

Sept. 1 Cash 110 P280, 000

Kate’s Capital 310 P280, 000
Owner’s investment of cash
LEDGER
SEPTEMBER 1, 2018 - KATE INVESTED P280, 000 CASH

Account: Cash Account

No. 110
Date Explanation Ref Debit Credit Balance

Sept. 1 Cash 110 P280, P280, 000

000
What is an Adjusting Entry?
• Adjusting entry is an entry made to update the financial data already
recorded. Making an adjusting entry helps the bookkeeper capture all
financial events that happened over a period of time within the
accounting cycle. It is essential in keeping the financial record updated.
The bookkeeper is going to look or examine accounts that needs to be
updated. Outlined below are the five basic sources of adjusting entries:
• 1. Depreciation expense
• 2. Deferred expenses of prepaid expenses
• 3. Deferred income of unearned income
• 4. Accrued expenses of accrued liabilities
• 5. Accrued income or accrued assets
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1. Depreciation
• This is a method of allocating the cost of an asset to an
expense over the accounting periods that make up the
asset’s useful life. Examples of assets subject to
depreciation are: Store, Office, Building, and
Transportation Equipment. These types of assets lose their
ability to provide useful service as time passes.
Depreciation can also be referred to as the decrease in the
usefulness of these types of assets. Take note that Land is
not subject to depreciation because the value of land
mostly increases as time passes. There are several methods
or formulas to compute the amount of depreciation.
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 The simplest is the straight-line method.

• The formula:
Annual Depreciation = Acquisition Cost _____________
Salvage or Residual Value Useful Life
Where:
 Acquisition Cost – the actual cost of the asset acquired.
 Salvage Value – the selling price of the asset upon reaching the useful
life.
 Useful Life – is the economic or productive life of the asset written in
months or years.
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• 2. Deferred expenses or prepaid expenses. These are items that have been
initially recorded as assets but are expected to become expenses over time
or through the operations of the business. In order to recognize the correct
amount of expenses, prepayments shall be amortized weekly, semi-monthly
or monthly, depending on its nature and purpose.
• 3. Deferred income or unearned income. These are items that have been
initially recorded as liabilities but are expected to become income over
time or through the operations of the business.
• 4. Accrued expenses or accrued liabilities. These are items of expenses that
have been incurred but have not been recorded and paid.
• 5. Accrued income or accrued assets. These are income items that have
been earned but have not been recorded and paid by the customer. In short,
these are receivables of the business.

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 Thank you so much!
I hope that you will cherish
what I have shared with you.
MS. JACEL D. GADON
[email protected]
FB: Jacel Gadon
CREDIT TO THE OWNER