• ACCOUNTING BOOKS-

JOURNAL AND LEDGER

REVIEW OF JOURNAL ENTRIES

BOOKS OF ACCOUNTS
 It is the finance records, ledgers, and journals that compose the company’s
accounts.

Two Major Books of Accounts

 Journal
 Ledger

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 known as the
process of journalizing.

Two Kinds of Journal

 General Journal - wherein all business transactions are recorded in
chronological order
 Special Journal- which are used by large companies for recurring
transactions such as sales on account and purchases of merchandise on
account.

• GENERAL JOURNAL
 It is the most basic type of journal.
• The accounting journal is the diary of the business.
• Journal entry is the format used write on the journal.
• A journal should always be balanced.
CONTENTS OF JOURNAL
 Date
 Account Titles and Explanation
 Reference number
 Debit
 Credit
 • TWO TYPES OF JOURNAL ENTRY
 Simple journal entry- which contains only one debit and one credit accounts

 Compound Journal entry- which contains either:

• one debit and two or more credits;
• or two or more debits and one credit;
• or two or more debits and two or more credit.
Example:
 On January 1, 2016, Mr. P. Rodriguez opened a tailoring shop which he
named “PR Tailoring”. He invested cash, P25,000 and sewing equipment,
P100,000 in the business.

• The Rule of Debit and Credit is as follows:

 • The Analysis of Transaction
The following are the steps involved to analyze transactions:
1. Analyse the transaction and determine which account are affected and the
direction of the effect.
2. Determine how to effect the direction identified in step #1 based on the
normal balances of the accounts.

Example 1:
On January 1, 2017, the owner contributed P10, 000 to the business.
Step 1
• The company receive cash from the owner.
• As a result of the cash received, the CASH account will increase.
• As a result of the owner’s contribution, the OWNER’S CAPITAL account
will increase.
STEP 2
• CASH is an asset account, therefore, its normal balance is DEBIT.
From Step 1, the transaction will INCREASE the CASH account. In order
to increase the cash account, it should be debited.
• OWNER’S CAPITAL is an equity account, therefore, its normal balance is
CREDIT.
From STEP 1, the transaction will INCREASE the OWNER’S CAPITAL
account. In order to increase the Owner’s capital account, it should be credited.
 • Example 2
On March 27, 2017, the company generated cash sales of P14,000.

Step 1
• The company received cash from cash sales to customers.
• As a result of the cash received, the CASH account will INCREASE.
• As a result of the sales generated, the SALES account will INCREASE.

STEP 2
• CASH is an asset account, therefore, its normal balance is DEBIT.
From Step 1, the transaction will INCREASE the CASH account. In order
to increase the cash account,, it should be debited.
• SALES is an revenue account, therefore, its normal balance is CREDIT.
From STEP 1, the transaction will INCREASE the SALES account. In
order to increase the Sales account, it should be credited.