Book of Accounts

Content 9
Five Major Accounts
Permanent Accounts
• Assets this is an economic resources owned by the business expected for
future gain.
• Liabilities this includes the debts, obligations to pay, and claims of the
creditors on the assets of the business.
• Owner’s Equity or Capital this includes the interest of the owner on the
business, claims of the owners on the assets of the business; the investment
of the owner plus or minus the results operations.
Temporary Accounts
• Revenue/Sales/Income is the total amount of income generated by the
sale of goods or services related to the company's primary operations.
• Expense is a cost that businesses incur in running their operations.
CHART OF ACCOUNTS
• A chart of accounts is a listing of all the accounts and is usually tailored to
the operations of the business
• It functions as a guide to the accountant or the bookkeeper in ensuring
uniformity of and consistency in the use of all accounts in recording
business transactions.
CHART OF ACCOUNTS
• A chart of accounts is a listing of all the accounts and is usually tailored
tothe operations of the business
Book of Accounts
A. Journal
B. Ledger
Double Entry System
❖The transaction has a dual effect which means that every
business transactions affects at least two accounts.
❖For every debit there is a corresponding credit.
❖The total amount of the accounts debited must equal the total
amount of the accounts credited.
Ex. Debit Credit
Equipment 50,000
Accounts Payable 50,000
To record equipment purchased on account
A. Journal. This is called the book of original entry which
are of two kinds:
• General Journal. A book of original entry that requires that both the
account being debited and the account being credited be listed along with
the respective amounts
• Special Journal. Journals other than the general journal. Special or
specialized journals include the cash receipts journal, the cash
disbursements journal, the purchases journal, and the sales journal.

Journalizing is the process of recording a transaction in the journal after it

has been recognized and measured.
A. General Journal
• General Ledger. A general ledger is a grouping of perhaps hundreds of
accounts that are used to sort and store information from a company's
business transactions. The general ledger is organized as follows:
❑balance sheet accounts (assets, liabilities, equity), and
❑income statement accounts (revenues, expenses, gains, losses)
• Subsidiary Ledger. A subsidiary ledger contains the details to support
ageneral ledger control account
A. General Journal (For our practice we will use the form below)

• General Ledger. A general ledger is a grouping of perhaps hundreds of

accounts that are used to sort and store information from a company's
business transactions. The general ledger is organized as follows:
❑balance sheet accounts (assets, liabilities, equity), and
❑income statement accounts (revenues, expenses, gains, losses)
• Subsidiary Ledger. A subsidiary ledger contains the details to support
ageneral ledger control account
A. General Journal
• Date Column. Shows the date when the transactions took place.
• Particulars/Description. Shows the item or the accounts debited and credited as
a result of a transaction analysis as well as a brief or concise explanation of what
the transaction is about.
• Folio. Shows the number of an account in a ledger or page of a ledger to which it
was transferred. Folio is the Latin word for page. It is also called reference.
• Debit Column. This is the money column showing the peso amount of the value
received in a transaction.
• Credit Column. This is the money column showing the peso amount of the
value parted with in a transaction.
• Opening Entry. The first entry made in the general journal. This constitute the
either the recording of the initial investments of a proprietor who is engaged in
the business for the first time or the recording of the beginning balances of
accounts in preparation for the next annual accounting period.
A. General Journal
• Reminders to beginners:
❖The date should be chronologically arranged
❖Take note of the indentions upon entering the accounts titles
❖Amounts in the General Journal are not totalled at the foot of the journal.
❖Leave one space every after transactions.
❖GL- means General Ledger
❖Abbreviation is not allowed
❖Eliminate the use of comma and peso sign in the money column. Use dash
(-) or “double zero for centavos.
❖Use only black pen
Recording Journal Entries
• Simple journal entry. Recording transactions that has one debit item and
one credit item.
Recording Journal Entries
• Compound journal entry. Recording transactions that has more than one
debit item and more than one credit item in either both sides.
B. Ledger. This is called the book of final entry because it is the
book where transactions that were recorded in the Journal are
transferred for final recording.
• General Ledger. A general ledger is a grouping of perhaps hundreds of
accounts that are used to sort and store information from a company's
business transactions. The general ledger is organized as follows:
❑balance sheet accounts (assets, liabilities, equity), and
❑income statement accounts (revenues, expenses, gains, losses)
• Subsidiary Ledger. A subsidiary ledger contains the details to support
ageneral ledger control account

Posting is the process of transferring information from the journal to the

ledger. Debits in the journal are correspondingly posted as debits in the
ledger, and credits in the journal are likewise posted as credits in the ledger.
B. General Ledger (T-account)
• General Ledger. A general ledger is a grouping of perhaps hundreds of
accounts that are used to sort and store information from a company's
business transactions. The general ledger is organized as follows:
❑balance sheet accounts (assets, liabilities, equity), and
❑income statement accounts (revenues, expenses, gains, losses)
• Subsidiary Ledger. A subsidiary ledger contains the details to support
ageneral ledger control account
B. General Ledger (T-account) For our practice we will use the form below:

• General Ledger. A general ledger is a grouping of perhaps hundreds of

accounts that are used to sort and store information from a company's
business transactions. The general ledger is organized as follows:
❑balance sheet accounts (assets, liabilities, equity), and
❑income statement accounts (revenues, expenses, gains, losses)
• Subsidiary Ledger. A subsidiary ledger contains the details to support
ageneral ledger control account
Subsidiary Ledger (Ex: Accounts Receivable Subsidiary Ledger)

• General Ledger. A general ledger is a grouping of perhaps hundreds of

accounts that are used to sort and store information from a company's
business transactions. The general ledger is organized as follows:
❑balance sheet accounts (assets, liabilities, equity), and
❑income statement accounts (revenues, expenses, gains, losses)
• Subsidiary Ledger. A subsidiary ledger contains the details to support
ageneral ledger control account
ENTRY FROM JOURNAL TO LEDGER FORM
 Business
Transactions and Their
Analysis As Applied to
the Accounting Cycle
Content 10, 11 and 12
Accounting Cycle
1. Identifying and Analyzing the events to be recorded.
2. Recording transactions in the journal.
3. Posting journal entries to the ledger.
4. Preparing the trial balance.
5. Preparing the worksheet and adjusting entries
6. Preparing Financial Statements.
7. Journalizing and Posting of adjusting journal entries.
8. Journalizing and Posting of closing journal entries.
9. Preparing the post-closing trial balance.
10. Journalizing and posting of reversing journal entries.
Rules for Debit and Credit
Rules for Debit and Credit
THE ANALYSIS OF A TRANSACTION
• Following are the steps involve in analyzing transaction:
• 1. From the business document, determine the kind of transaction or
exchange made.
• 2. Analyze the transaction to determine the accounts affected. They can
either affect the assets, liabilities, owner’s equity, revenue, or expenses
accounts.
• 3. Determine the effect of the transaction on the accounts affected. The
transaction can either increase of decrease the accounts.
• 4. Apply the rules of debited and credited to show the corresponding
increase or decrease.