THE BOOKS OF ACCOUNTS

& ACCOUNTING EQUATION

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 Learning Objectives:
At the end of this module, learners must be able to:

a. explain the different types of book of accounts;

b. illustrate the accounting equation; and
c. perform operations involving simple cases with
the use of accounting equation.
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 Books of Accounts

The books of accounts are also called

accounting books. It is where transactions
that the business enters into and events
that affect the business are recorded.
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 Types of book of accounts:

1. Journal (book of original entry)

2. Ledgers (book of final entry)
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 1. Journal

1. Journal (book of original entry) – Used in

recording daily transactions of the business.
The accounts affected by transactions or
events are determined. These effects on the
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accounts (increase/decrease) are recorded in

the journals as debit and credit.
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 1. Journal
a. Cash receipt journal- for cash receipts only
b. Sales journal-for sales made on credit
c. Sales return journal- for recording bad orders from
customers or goods returned
d. Purchase journal
e. Purchase return journal- for recording bad orders from
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suppliers
f. Cash disbursement journal- records only payment of cash.
 2. Ledgers
 The ledger classifies transactions in the journal
to their respective accounts.
 The entries in the journals are transferred and
classified on a per-account basis in order to
compute for the ending balances of each
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account to be reported.
 This transferring is called “Posting”
 2. Ledgers
Types of Ledgers:

 A. General Ledger
 B. Subsidiary Ledger- contains the
details of an account such as
information regarding customers and
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suppliers.
 The Basic Accounting
Equation
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 1. Investment of P50,000 by Engr. Juan
Dela Cruz to his newly established
business:
Cash ₱20,000
Office furniture of ₱25,000
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Office Equipment of ₱5,000

 2. Hired a secretary. Per
agreement, the secretary would
receive a monthly salary of
₱6,500.
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 3. Bought a computer on
account, ₱18,000
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 4. Paid half of the account to
the supplier of the computer.
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 5. Billed a client for services
rendered ₱20,000.
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 6. Collected ₱15,000 of the
account in #5.
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 7. Paid business taxes, ₱500
for cash.
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 8. Paid rent for the office,
₱5,000 for cash.
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 9. Bought for cash a filing
cabinet, ₱3,500
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 10. Issued a note to settle the
balance of the account to the
supplier of the computer.
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 11. Collected the balance of
the account in #6.
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 12. Engr. Juan dela Cruz
withdrew ₱7,000 for his
personal use.
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 13. Paid electric bills of the
business, ₱1,200 for cash.
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 14. Paid ₱800 for electric bills of the
residence of Engr. Regua (to
accommodate him as he was out of town
to personally pay for the bills. Engr. Regua
would pay back the business)
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 15. Billed another client for services
rendered, ₱15,000. Immediately, the
client issued a promissory note for the
same amount to the business.
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