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Accountancy Business and
Management (ABM)
FUNDAMENTALS OF ACCOUNTING
BUSINESS and MANAGEMENT 1
Quarter 3 – Week 4 Module
Books Of Accounts
ABM 11 – FUNDAMENTALS OF ACCOUNTING BUSINESS and MANAGEMENT 1
Alternative Delivery Mode
Quarter 3 – Week 4 Module: Books of Accounts
First Edition, 2020

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 What I Need to Know

This module was designed and written with you in mind. It is here to help you master
the nature of FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 1.
The scope of this module permits it to be used in many different learning situations. The
language used recognizes the diverse vocabulary level of students. The lessons are
arranged to follow the standard sequence of the course. But the order in which you read
them can be changed to correspond with the textbook you are now using.

Content Standard
The learners demonstrate an understanding of:
• The major types of accounts, journal, and ledger

Performance Standard
The learners shall be able to:
• differentiate a journal from a ledger and identify the types of journals and
ledgers.

Most Essential Learning Competencies

The learner…
• Illustrate the format of a general and special journals.
• Illustrate the format a general and subsidiary ledger.

Learning Objectives
After going through this module, you are expected to:
• understand the different books of accounts and state its uses.
• journalize transactions in journals.
• post entries in general ledgers.

What I Know
The business uses special journals in recording transactions. Indicate in what
journal each of the following transactions will be recorded: SJ (sales journal), PJ,
(purchase journal), CRJ (cash receipts journal), CDJ (cash disbursement journal), GJ
(general journal).

1. Invested land and building

2. Cash purchases of merchandise on account
3. Cash purchases of equipment for office use
4. Credit memo received from supplier
5. Cash refund given to a customer form merchandise returned.
6. Owner withdrew merchandise for personal use.
7. Partial collection of account from customer.
8. Sold merchandise on account
9. Sale of asset, other than merchandise, for cash.
10. A promissory note is issued for an account that is due.

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 Lesson

4 Books of Accounts

What’s In
DID YOU KNOW?
Whenever a business establishment or taxpayer applies for Certificate of
Registration (COR) with Bureau of Internal Revenue (BIR), it also required to register the
books of accounts.
The books of account should also be registered annually on or before January 31
of each year.
www.bir.gov.ph

What’s New

BOOKS OF ACCOUNTS
1. General journal is referred to as the book of original entry. It records business
transaction in order of date using the principle of “debit and credit”.

2. General Ledger is referred to as the book of final entry. It summarized all the
journal entries of an account to get the ending balances.

3. Cash receipt journal is a special journal used to record cash sales and/or
collection of receivables.

4. Cash disbursement journal is a special journal used to record cash payments of

expenses and/or payables.

5. Sales journal is a special journal used to record all sales of merchandise on credit
(receivable from customer)

6. Purchase journal is a special journal used to record all purchases of merchandise

on credit (payable to supplier)

For Businesses engaged in SALES OF GOODS

For SERVICE BUSINESS or PROPERTIES
It is required to maintain at least It is required to maintain at least six which are
four which are the following: the following:
1. General Journal 1. General Journal

2. General Ledger 2. General Ledger

3. Cash Receipt Journal 3. Cash Receipt Journal

4. Cash Disbursement Journal 4. Cash Disbursement Journal

5. Sales Journal

6. Purchases Journal

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 What is It
THE GENERAL JOURNAL
The transactions are initially recorded in journal which is called the book of
original entry. The debit and credits of each are recorded chronologically by day. The
simplest form of journal is the two-column general journal and the process of recording
in this book is called journalization. Each entry made is called the journal entry.
Each journal entry contains the following items:

1. Date is used to show the day of the month on which each transaction takes
place.

2. Particulars column is used to show every account title affected by each

transaction and to give some explanation of justification of the debits and
credits being made to the accounts.

3. PR or Posting Reference is used to indicate the page number of the ledger in

which the entry is transferred.

4. The debit amount is written on the Debit column.

5. The credit amount is written on the Credit column opposite the credit account.

An entry with one debit and one credit is called simple journal entry.
When an entry has more than one debit or more than one credit is called compound
journal entry.

Illustration:
On June 1, Ka Toning made cash investment of ₱50,000.

DATE PARTICULARS PR DEBIT CREDIT

June 1 Cash 101 ₱ 50000
Ka Toning, Capital 300 ₱ 50000

To record initial capital

THE LEDGER
The journal provides the recording of transactions in one place or book while the
ledger hows in one place all the changes (increases or decrease) that took place for a
particular account. The debits and credits of a particular account should be
summarized in one place called ledger and these ledgers are filled in the book called
general ledger. The process of transferring the debit and credits from the journal to
ledger is called posting. Cross-reference facilities the tracing of an entry to and from
journal to ledger.

Illustration:
ACCOUNT NAME: CASH ACCOUNT No. 101

DEBIT CREDIT
DATE EXPLANATION PR DEBIT CREDIT
BALANCE BALANCE

June 1 Initial Capital GJ 1 ₱ 50000 ₱ 50000

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 ACCOUNT NAME: KA TONING, CAPITAL ACCOUNT No. 300

DEBIT CREDIT
DATE EXPLANATION PR DEBIT CREDIT
BALANCE BALANCE

June 1 cash investment GJ 1 ₱ 50000 ₱ 50000

SPECIAL JOURNALS
Special Journals are columnar books of original entry for recording similar
transactions. Their design and use depend on the needs of a specific business entity.

The following are the advantages of using the specific journals.

1. It is time saving. With special columns for transactions for a repetitive nature,
writing or recording is reduced.
2. Division of labor is possible – several persons can work simultaneously.
3. Specialization and pinpointing of responsibility
4. Errors are limited

SPECIAL JOURNALS TRANSACTIONS

1. Sales Journal Selling of merchandise on credit
2. Purchase Journal Buying of merchandise on credit
3. Cash Receipt Journal Cash collection
4. Cash Disbursement Journal Cash payments

1. Sales Journal – each entry debits accounts receivable and credit sales.
To illustrate how sales are entered in the sales journal, assume the following
transactions took place for Ka Toning Hardware who sells on credit with terms
2/10, n/30:
June 3 Sold goods to Olivia Trading, ₱5,000
5 Sold goods to Lopez Store, ₱2,500
8 Sold goods to Maria Enterprises, ₱7,300

Illustration in Sales Journal

ACCOUNTS
INVOICE RECEIVABLE SALES
DATE CUSTOMER No. PR TERMS Debit Credit
Jun 3 Olivia Trading 101 ✓ 2/10, n/30 ₱5,000 ₱5,000
5 Lopez Store 103 ✓ 2/10, n/30 2,500 2,500
8 Maria Enterprises 112 ✓ 2/10, n/30 7,300 7,300
₱14,800 ₱14,800

Illustration in Subsidiary Ledgers:

Name: Olivia Trading Name: Lopez Store
Address: Makati City Address: Taguig City
Terms: 2/10, n/30 Terms: 2/10, n/30
Date Explanation PR Debit Credit Balance Date Explanation PR Debit Credit Balance
Jun 3 GJ1 ₱5,000 ₱5,000 Jun 5 ₱2,500 ₱2,500

Name: Maria Enterprises Subsidiary Ledgers – a group of similar

Address: Makati City accounts whose combined balances equal the
Terms: 2/10, n/30 balance in a specific general ledger account.
Date Explanation PR Debit Credit Balance The general account that summarizes a
₱7,300 ₱7,300 subsidiary’s ledgers account balance is called a
control account.

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Illustration in General Ledger
Account Name: Accounts Receivable Account No. 001-200
DEBIT CREDIT
DATE EXPLANATION PR DEBIT CREDIT
BALANCE BALANCE

June 30 GJ1 ₱ 14800 ₱ 14800

Account Name: Sales Account No. 004-100

DEBIT CREDIT
DATE EXPLANATION PR DEBIT CREDIT
BALANCE BALANCE
June 30 GJ1 ₱ 14800 ₱ 14800

2. Purchases Journal – each entry debits purchases and credit accounts payable.
To illustrate using Ka Toning Hardware:

June 1 Bought goods from Paul Warehouse, ₱7,000. Terms: 2/10, n/30
June 4 Bought goods from Song Trading, ₱4,500. Terms: 2/10, n/30
June 7 Bought goods from Jamie Store, ₱9,000. Terms: 2/10, n/30

ACCOUNTS
PURCHASES PAYABLE
DATE SUPPLIER INVOICE No. Debit PR Credit
June 1 Paul Warehouse AP 2201 ₱ 7,000 ✓ ₱ 7,000
4 Song Trading AP 3421 4,500 ✓ 4,500
7 Jamie Store AP 1100 9,000 ✓ 9,000
₱ 20,500 ₱ 20,500

3. Cash Receipt Journal -All cash receipts transactions are recorded in this journal
such as: cash investment, loans, cash sales, collections of customers’ accounts and
cash refunds. Each entry has equal debits and credits.
To illustrate, let us continue with Ka Toning Hardware.

June 1 – Ka Toning made cash investment of ₱50,000.

June 2 – Borrowed from BDO ₱50,000 and issued a 90-day, 15%
promissory note.
June 6 – Cash sales summary for the week, ₱8,000
June 10 – Collected ₱2,000 from Olivia Trading.
June 12 – Collected in full, from Lopez Store.

Accounts
Receivable SUNDRY
Sales Cash
Received Explanatio OR CASH Disc. Sales Accoun
Date from n No. Dr. Dr. PR Credit Cr. t Title PR Dr. Cr.
June Toning,
1 Ka Toning Investment ₱50,000 Capital ₱50,000
2 BDO 90day,15% Loan 50,000
50,000 Payable
6 Customers Cash sales 8,000 ₱8,000
7 Olivia partial
Trading collection 2,000 ✓ ₱2,000
10 Lopez Store full collect 2,450 ₱50 ✓ 2,500
₱112,450 ₱50 ₱4,500 ₱8,000 ₱100,000

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4. Cash Disbursement Journal – All cash payment recorded in this journal such as:
• Cash purchases of merchandise and other assets
• Payments of accounts and other liabilities
• Payment of expenses
• Cash withdrawals of the owner
• Cash refund to customers

To illustrate, assume that the following additional transactions occurred for Ka

Toning Hardware:

June 6 – Cash purchases amounted to ₱8,000.

June 9 – Paid account due to Paul Warehouse ₱7,000.
June 15 – Paid the salary of an assistant, ₱4,500.
June 20 – The owner, Ka Toning, withdrew ₱1,000.
June 25 – Made cash refund to Maria Enterprises amounted to ₱300.

Accounts
Purchase Payable Cash SUNDRY
Vo. CASH Discount Purchases Account
Date Paid to Explanation No. Cr. Cr. PR Debit Debit Title PR Dr Cr.
June cash
6 Supplier purchases ₱8,000 ₱8,000
9 Paul full payment 140
Warehouse 6,860 ✓ ₱7,000
15 payment of
Bert Cruz salary 4,500 Salaries ₱4,500
20 cash Ka
drawing Toning,
Ka Toning 1,000 Drawings 1,000
25 Maria Ent. cash refund 300 ✓ 300
₱20,660 ₱7,300 ₱8,000 ₱5,500

Transactions which cannot be recorded in the special journals are recorded in the
General Journal. Examples of these transactions are:
1. Non-cash investment of the owner
2. Note issued for merchandise of other asset purchased or solo
3. Credit memo for returns or allowances
4. Other assets sold or bought on account
5. Asset withdrawn by the owner other than for cash

What’s More
Direction: Using a general journal form, journalize the following transactions, then
post to the general ledger. Use provided Chart of Accounts below.
Butingting Repair Shop
Chart of Accounts
ASSETS LIABITILIES
100 Cash 200 Accounts Payable
110 Supplies 210 Notes Payable
120 Notes Receivable OWNER’S EQUITY
120 Furniture and Fixture 300 Ramos, Capital
330 Ramos, Drawings
400 Service Revenue
510 Rent Expense
520 Utitilites
530 Salaries Expense

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On January 1 of the current year, Mr. Fredie Ramos opened an appliance repair shop
he called, “Butingting Repair Shop” by investing ₱100,000 cash in the business. He
had completed the following transactions in the said month.
2 Paid the rent of the shop space for the month, ₱4,500.
5 Purchased shop supplies on account, ₱16,700.
6 Purchased a second-hand tricyle, ₱30,000 on credit. Gave ₱10,000 cash and issued a
promissory note on the balance.
9 Purchased a filing cabinet, table and chairs from Abenson Trading on credit ₱15,000.
12 Completed repair for S. Mariano, ₱4,200 and received ₱2,000 cash and balance on the
account.
18 Completed various repair services to cash customers and received ₱20,000.
20 Paid Abenson Trading in full.
25 Received payment from S. Mariano.
26 Paid utility bills, ₱750.
27 Mr. F. Ramos, the owner withdrew, ₱5,000 cash for personal use.
30 Paid the helper’s salary, ₱5,000.

What I Have Learned

1. Explain what a journal is.
2. Explain what a ledger is.
3. Explain what are control accounts, and give two examples.
4. Explain what is a subsidiary ledger and what is its use.
5. Enumerate the four major transactions of a merchandiser.
6. Explain when to use special journals.
7. Give advantages of using special journals.

Assessment
Direction: Encircle the letter of the correct answer.

1. The process of recording the business transactions in a journal.

a. cross- reference
b. footing
c. journalization
d. posting

2. This is known as the book of original entry.

a. journal
b. ledger
c. subsidiary
d. trial balance

3. It serves as a cross-reference when it is desired to trace the amount from one

record to another.
a. date
b. page number
c. particulars
d. posting reference

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4. The owner purchased an asset, made partial payment and balance on account.
What type of journal entry is required?
a. Simple journal entry
b. Single-entry bookkeeping
c. compound journal entry
d. natural entry

5. In ledger, the items of similar nature are grouped together. This is the first step in
the accounting cycle.
a. Both statements are true.
b. First statement is true. Second statement is false.
c. First statement is false. Second statement is true.
d. Both statements are false

6. How often is posting to the subsidiary ledger made?

a. Daily
b. Monthly
c. made only after balancing the accounts
d. there is no restriction as to when required

7. Entries in the special journals are posted.

a. Daily c
b. Periodically for all columns
c. periodically for special columns and daily for sundry columns
d. are never posted

8. Which of the following figures will not be posted in the ledger?

a. The cash credit columns in the cash payment book
b. The sundry debits column total in the cash payment book
c. The purchase debit column total in the purchases journal
d. None of the above

9. The use of the special journals permits division of labor. It eliminates details in
the general ledger.
a. Both statements are true
b. First statement is true. Second statement is false
c. First statement is false. Second statement is true.
d. Both statements are false

10. All transactions involving outflows of cash are recorded in cash disbursement
journal except.
a. personal drawing
b. cash purchases
c. collection of payment
d. payment of expenses