TOPIC LEARNING

TOPIC # 5: OUTCOMES:
BOOKS OF Identify the major accounts in
ACCOUNTS applying the accounting equation to
account for the values of financial
AND THE statement items.

DOUBLE-ENTRY
SYSTEM

READING ASSIGNMENT:
Financial Accounting and Reporting
Fundamentals by Zeus B. Millan: Pages
138-154

Note: While reading Chapter 5, draft out your personal summary notes on your notebook. Your
instructor highly encourages that you use illustrations, diagrams, tables and the like. Be creative!
These personal summary notes will become extremely useful by the time you reach your final
year in the Accountancy program and during your formal review for the CPA Licensure
Examination, so make sure to give your best in simplifying what you can! 

LECTURE NOTES

BOOKS OF ACCOUNTS - Minimum requirements:

SPECIAL JOURNAL – where cash receipts, cash disbursements, sales

for cash, and purchases made in cash are entered.
JOURNAL
GENERAL JOURNAL – all other transactions which are not entered in
the special journals are entered here.

GENERAL LEDGER – all accounts found in the trial balance are posted
here.
LEDGER
 SUBSIDIARY LEDGER – shows a breakdown of the amounts presented
under the controlling accounts, i.e. Accounts Receivable, etc.
 General journal/Book of original entry.
Accountable transactions are recorded in a chronological manner based on their dates
using the double-entry system.
 Special journals:
o Cash receipts journal. A special journal used to record cash sales, and collection of
accounts receivable.
o Cash disbursements journal. A special journal used to record the payment for cash
purchases, expenses, or payables.
o Sales journal. A special journal used to record sales on credit.
o Purchases journal. A special journal used to record purchases on credit.
 General ledger/Book of final entry.
The journal entries from the general journal are summarized per account to get their
respective ending balances.

THE DOUBLE-ENTRY SYSTEM.

The double-entry system requires that for all transactions, the amounts entered as debits must be
equal to the amounts entered as credits.
 Concept of duality: each transaction is recorded in two parts – debit and credit
 Concept of equilibrium: each transaction is recorded in terms of equal debits and credits.

CONCEPTUAL PORTFOLIO

Prepare the accounts to be debited and credited for the following transactions.

Jan 1, 2020 Owner contributed cash and machinery to the business.

Jan 3, 2020 The business obtained a loan from Rubia Bank.
Jan 4, 2020 Purchase of inventory on account from Jiffa Trading.
Jan 8, 2020 Sale of goods on account to ABC.
Jan 19, 2020 Payment as full settlement of accounts payable to Jiffa Trading.
Jan 21, 2020 Collected all of the accounts receivable from ABC.
Jan 24, 2020 Purchased equipment on account.
Jan 24, 2020 Owner withdrew cash from the business.