FUNDAMENTALS OF

ACCOUNTANCY,
BUSINESS AND
MANAGEMENT
Recall…..recall..recall

What is ACCOUNTING?
Accounting is the process
of IDENTIFYING,
RECORDING, and
COMMUNICATING
economic events of an
organization to interested
users.” (Weygandt, J. et. al)
Books of Accounts
Lesson objectives:
• Understand the uses of the two books of accounts (journal
and ledger) in recording business transactions.
• Explain the use of the general and special journals to record
business transactions.
• Discuss the use of the general and subsidiary ledgers to
record business transactions.
 journal
• Companies initially record transactions and events in
chronological order (the order in which they occur).
• Thus, the journal is referred to as the book of original
entry.
• For each transaction the journal shows the debit and
credit effects on specific accounts.
journal
journal
journal
 General journal
The general journal is the most basic journal.
Typically, a general journal has spaces for dates, account
titles and explanations, references, and two amount
columns.
 General journal
The journal makes several
significant contributions to the
recording process:
 It discloses in one place the
complete effects of a
transaction.
 It provides a chronological
record of transactions.
 It helps to prevent or locate
errors because the debit and
credit amounts for each entry
can be easily compared.
Journalizing business
transactions
Entering transaction data in the journal is known as journalizing. Companies make separate
journal entries for each transaction. A complete entry consists of:
 The date of the transaction which is entered in the Date column.
 The debit account title (that is, the account to be debited) which is entered first at the extreme
left margin of the column headed “Account Titles and Explanation,” and the amount of the
debit is recorded in the Debit column.
 The credit account title (that is, the account to be credited) which is indented and entered on
the next line In the column headed “Account Titles and Explanation,” and the amount of the
credit is recorded in the Credit column.
 A brief explanation of the transaction which appears on the line below the credit account title.
A space is left between journal entries. The blank space separates individual journal entries
and makes the entire journal easier to read.
 The column titled Ref. (which stands for Reference)which is left blank when the journal entry
is made. This column is used later when the journal entries are transferred to the ledger
accounts
Journalizing business
transactions
Double entry bookeeping
Double-entry bookkeeping is a method of
recording transactions where for every
business transaction, an entry is recorded in at
least two accounts as a debit or credit.
In a double-entry system, the amounts
recorded as debits must be equal to the
amounts recorded as credits.
Double entry bookeeping
Debits represent money being paid out of a
particular account
Credits represent money being paid in.
In a standard journal entry, all debits are
placed as the top lines, while all credits are
listed on the line below debits
 NORMAL BALANCE
• the normal balance of an account is the
side of the account that is positive or
increasing.
• the normal balance for asset and expense
accounts is the debit side
• while for income, equity, and liability
accounts it is the credit side.
Double entry bookeeping
Consider the following transactions as an example:
• September 1, 2022 Mr. Ben Mabait invested PHP500,000 in a
restaurant business by opening an account with SuperBank.
• September 5, 2022 purchased kitchen appliances for his
business amounting to PHP100,000 paid in cash.
• September 6, 2022 started his operations a made a sales for
that day amounting to PHP20,000.
• September 7, 2015, purchased a motorcycle costing
PHP80,000. Pays PHP30,000 cash and agrees to pay the
remaining PHP50,000 on account (to be paid later).
 September 1, 2012 Mr. Ben Mabait invested PHP500,000 in a restaurant business by
opening an account with SuperBank.

Sept. 01, 2022 Cash 500,000

Ben Mabait Capital 500,000

To record investment of Ben Mabait

 September 5, 2022 purchased kitchen appliances for his business amounting to
PHP100,000 paid in cash.

Sept. 05, 2022 Kitchen Equipment 100,000

Cash 100,000

To record purchase of kitchen equipment

 September 6, 2022 started his operations a made a sales for that day amounting to
PHP20,000.

Sept. 06, 2022 Cash 20,000

Sales revenue 20,000

To record sales for the day

 September 7, 2015, purchased a motorcycle costing PHP80,000. Pays PHP30,000 cash
and agrees to pay the remaining PHP50,000 on account (to be paid later).

Sept. 07, 2022 Vehicle 80,000

Cash 30,000
Account Payable 50,000

To record purchase of motorcycle

 September 15, paid rental for month of Septemeber amounting to 15,000 pesos

Sept. 15, 2022 Rental Expense 15,000

Cash 15,000

To record payment of rental for September 2022

 September 25, paid 50,000 pesos for the balance on service motorcycle

Sept. 25, 2022 Account payable 50,000

Cash 50,000

To record payment of balance for service vehicle

 September 27, applied loan from bank and received 250,000 pesos

Sept. 27, 2022 Cash 250,000

Loan payable 250,000

To record loan from bank

Special journal
Some businesses encounter voluminous quantities
of similar and recurring transactions which may
create congestion if these transactions are recorded
repeatedly in a single day or a month in the general
journal. In order to facilitate efficient and practical
recording of similar and recurring transactions, a
special journal is
Special journal
The following are the commonly used special journals:
• Cash Receipts Journal – used to record all cash that has
been received
• Cash Disbursements Journal – used to record all
transactions involving cash payments
• Sales Journal (Sales on Account Journal) – used to record
all sales on credit (on account)
• Purchase Journal (Purchase on Account Journal) – used to
record all purchases of inventory on credit (or on account)