Chapter 6

Accounting Books –
Journal and Ledger
Learning Competencies
The learners should be able to……..
1. Differentiate the journal from the general ledger.
2. Determine the normal balance of an account.
3. Prepare journal entries to record basic business transaction.
4. Determine balances of accounts using the T-account.
 Books of Accounts Description Function
1. Journal  Book of original entries  Journalizing (Initial
a. General Journal Recording)
b. Special Journals
2. Ledger  Book of secondary entries  Posting (Classifying)
a. General Ledger
b. Subsidiary Ledgers

Type of Account Increase Decrease

(NORMAL BALANCE)
ASSET Debit Credit
LIABILITY Credit Debit
EQUITY Credit Debit
INCOME Credit Debit
EXPENSE Debit Credit
 Pro-forma entries:
1. Owner’s investment in cash
Date Cash xx
Owner’s capital xx
to record the owner’s initial investment to
the business

2. Acquisition of equipment on cash basis

Date Equipment xx
Cash xx
to record the acquisition of equipment

3. Acquisition of inventory on cash basis

Date Inventory xx
Cash xx
to record the acquisition of inventory on
cash basis
4. Acquisition of inventory on credit
 Perpetual inventory system:
Date Inventory xx
Accounts payable xx
to record the acquisition of inventory on
credit

 Periodic inventory system:

Date Purchases xx
Accounts payable xx
to record the acquisition of inventory on
credit

5. Payment (settlement) of accounts payable

Date Accounts payable xx

Cash xx
to record the settlement of accounts
payable
6. Sale of inventory on cash basis
 Perpetual inventory system:
Date Cash xx
Sales xx
to record cash sale
Date Cost of sale (or Cost of goods sold) xx
Inventory xx
to charge the cost of inventories sold as
expense

 Periodic inventory system:

Date Cash xx
Sales xx
to record cash sale
7. Sale of inventory on credit
 Perpetual inventory system:
Date Accounts receivable xx
Sale xx
to record credit sale
Date Cost of sale (or Cost of goods sold) xx
Inventory xx
to charge the cost of inventories sold as
expense

 Periodic inventory system:

Date Accounts receivable xx

Sales xx
to record credit sale
8. Collection of accounts receivable
Date Cash xx
Accounts receivable xx
to record the collection of accounts
receivable

9. Payment of an (advertising) expense

Date Advertising expense xx

Cash xx
to record the payment for advertising
expense
10. Owner’s drawings (owner’s withdrawal of cash from the business)

Date Owner’s drawings xx

Cash xx
to record the temporary withdrawals of the
owner
Reference:
 Ferrer and Millan (2018). Fundamentals Of Accountancy, Business &
Management 2. Baguio, Philippines: Bandolin Enterprise.