MODULE 3: DOUBLE-ENTRY BOOKKEEPING  Accounts listed here are carried over

to the following accounting period

Learning objectives:
1. Journalize financial transactions
2. Post transactions to the ledger
3. Prepare a trial balance
*DISCUSSION OF CHAPTER 5 OF FINACO
BOOK
(AS OF)
Statement of Income accounts
 Nominal accounts or Temporary
accounts
 Accounts listed are not carried over
to the next period (FOR THE YEAR
OF)

A business entity has TWO Books of accounts Ledger

 Book of Original Entry
 Book of Final Entry
A JOURNAL is a chronological record of ALL
financial transaction
 In order of occurrence
 Referred to as the Book of Original
Entry
*insert journal slide pic
A=L+C+R-E
Each element of the Accounting Equation has
smaller sub-elements called accounts
Account - the detailed record of all increases
and decreases that have occurred..
 Group of accounts for a business
entity is called a ledger
 Book of Final Entry
*insert slide pic
Each ACCOUNT TITLE must have at least one
LEDGER
Chart of Accounts
 Table of contents ng ledger
 List of account titles to be used by the
business entity
Therefore: account is a title of a specific sub-
element of the accntg equation

Major Account Classifications The T-Account

Assets *insert slide pic
 Owned and controlled
Liabilities T-account resembles a ledger
 Often identified by titles that include
the word payable Balancing a T-account
Owner's equity  To obtain the ending balance
 Clark, Capital
 Clark, Drawing Accounting Cycle
Revenue *insert slide pic
 Fees earned
 Fares earned ACCOUNTING CYCLE STEP 2: JOURNALIZING
 Commission rev
 Tuition fee income Transactions that affect Statement of
 Sales rev Financial Position accounts
Expenses *insert slide pic

TWO types of accounts Transaction that affect the Income state

Statement of Financial Position accounts (Nominal)
accounts *insert slide pic
 Real accounts or Permanent accounts
 A,L,E NORMAL BALANCE of an account is the
INCREASE SIDE
Flow of Business of Transactions
1. Transaction authorized
2. Transaction takes place
3. Document prepared
4. Entry recorded in journal
5. Entry posted to ledger

System to Analyse Transactions

ACCOUNTING CYCLE STEP 3: POSTING TO THE

LEDGER

Post account title values in order of

appearance in the journal entries
*INSERT SLIDE PIC
 CHAPTER 4: TYPES OF MAJOR ACCOUNTS Expenses arise in the course
Learning Objectives: of the ordinary activities of
1. State the 5 major accounts a business
2. Give examples of each major type of Losses represent other
account items that meet the def of
expenses and may or may
not arise in the course of
THE ACCOUNT the ordinary activities of the
The account is the basic storage of entity
information in accounting
A record of the inc and dec in an asset, CLASSIFICATION OF THE FIVE MAJOR
liability, equity, income or expense ACCOUNTS
Can be depicted through a T-account: Balance Sheet Accounts - shows the
1. Account title - describes the specific financial position of the company
item of ALCRE  Assets
2. Debit side - LEFT side of account  Liabilities
3. Credit side - RIGHT side of account  Equity
Income Statement accounts - shows the
THE FIVE MAJOR ACCOUNTS profit or loss of a business
Elements of the financial statements  Income
 Expenses
Assets - economic resources u can
control that have resulted from past CHART OF ACCOUNTS
events and can provide you with future List of all the accounts used by the
economic benefits business
Liabilities - present obligations that have
resulted from past events and can COMMON ACCOUNT TITLES
require you to give up resource when
settling them BALANCE SHEET ACCOUNTS
Equity - assets less liabs
Income - increases in economic benefits Assets
during the period in the form of  Cash
increases in assets, or decreases in  Accounts receivable
liabilities, that result in increases in  Allowance for bad debts - the
equity, excluding those relating to aggregate amount of estimated losses
investments made by the bsnss owner from uncollectible accounts
Income includes both revenue and receivable (allowance for doubtful
gains accounts)
Revenue - arises in the  Notes receivable
course of ordinary activities  Inventory
of the business e.g. Sales &  Prepaid supplies
service fees  Prepaid rent
Gains - other items that  Prepaid insurance
meet defntn of income and  Land
may or may not arise in the  Building
course of the ordinary  Accumulated depreciation - building
activities of an entity  Equipment
Expense - decreases in economic benefit  Machineries and other factory
Expenses include both expenses equipemnt
and losses  Transportation equipment,
e.g., vehicles, delivery trucks
  Office equipment, e.g., desks,  Freight-out (delivery expense,
cabinets, chairs transportation-out, carriage
 Computer equipment, e.g., outwards)
server, personal computers,  Salaries expense
laptops  Rent expense
 Furniture and fixtures, e.g.,  Utilities expense
desks, cabinets, movable  Salaries expense
partitions  Bad debt expense
 Accumulated depreciation -  Depreciation expense
equipment - the total amount of  Advertising expense
depreciation expenses recognized  Insurance expense
since the equipment was acquired  Taxes and licenses
and made available for use  Transportation and travel expense
 Interest expense
Liabilities  Miscellaneous expense
 Accounts payable  Losses
 Notes payable
 Interest payable - interest incurred
but not yet paid; it arises from
interest-bearing liabilities (interest to
be incurred from bank loan)
 Utilities payable
 Unearned income - items related to
income that were collected in
advance before they are earned; after
the earning process is completed,
these items are transferred to income

Equity
Owner's capital - residual amount
after assets less liabs
Increased by
 Investments
 Income/profit
Decreased by
 Withdrawals
 Expenses/loss
Owner's drawings - used to record
the temporary withdrawals of the
owner during the period

INCOME STATEMENT ACCOUNTS

Income
 Service fees
 Sales
 Interest income
 Gains

Expense
 Cost of sales (or cost of goods sold)
CHAPTER 5: BOOK OF ACCOUNTS & DOUBLE-  Used to classify the effects of business
ENTRY SYSTEM transactions on the accounts
 Book of secondary entries / book of
Learning Objectives: final entries
1. Identify the uses of the two books of  Process is called posting
accounts
2. Explain the rules of debits and credits Kind of ledgers
a. General ledger - contains all the
accounts appearing in the trial
THE BOOK OF ACCOUNTS balance
A business maintains two books of b. Subsidiary ledger - provides a
accounts, namely: breakdown of the balance of
1. Journal; and controlling accounts
2. Ledger Controlling account (or
control account) - consists
JOURNAL of a group of accounts with
 Book of original entries similar nature
 Where business transactions are first
recorded DOUBLE-ENTRY SYSTEM
 Recorded through journal entries All transactions are recorded in the
(process called journalizing) accounting records using the double-
entry system
TYPES OF JOURNALS Each transaction is recorded in two
parts - debit & credit
Special Journals
Used to record transactions of a similar CONCEPTS OF DUALITY AND EQUILIBRIUM
nature 1. The concept of duality - views each
1. Sales journal - records sales on transaction as having a two-fold effect
account on values (received and parted with)
2. Purchases journal - record purchase of 2. The concept of equilibrium - requires
inventory that each transaction is recorded in
3. Cash receipts journal - used to record terms of equal debit and credits
all transactions involving receipts of
cash ENDING BALANCE OF AN ACCOUNT
4. Cash disbursements journal - record
all transactions involving payments of CONTRA AND ADJUNCT ACCOUNT
cash

General Journal
All other transactions that cannot be
recorded in the special journals are
recorded in the general journal
Includes:
 Purchase of inventory in ex for notes
payable
 Adjusting entries
 Correcting entries
 Reversing entries

LEDGER