Journals and

General
Ledgers
 The General Journal and Special
Journal
 Many businesses maintain several types of journals. The
nature of the business operations and the volume of
transactions determine the type and number of journals
needed. The simplest type of journal is called the general
journal. The process of recording a transaction is called
journalizing the transactions. This type of journal is unique
among journals because it may be used to record any type of
business transactions. Recording all transactions in the general
journal is not cost effective and time consuming. To speed up
and simplify the recording process, most businesses make use
of special journals. Each special journal is designed to record a
particular type of transaction efficiently and quickly.
 Examples of special journals and
their use are the following:
a. Cash Receipts Journal – is used to record all cash that had
been received.
b. Cash Disbursements Journal – is used to record all
transactions involving cash payments.
c. Sales Journal (Sales on Account Journal) – is used to
record all sales on credit (on account)
d. Purchase Journal (Purchase on Account Journal) – is used
to record all purchases of inventory on credit (or on
account)
The importance of using a journal
 The journal shows all information concerning a
particular transaction.
 The journal provides a chronological record of all
the financial events in the business over time. If we
want to know about a certain transactions of years
or months back, we can trace the said transactions
as long as we have the date of the said transaction.
The entries in the journal are arranged by date that
makes it necessary to locate a particular even
 The Use of General Ledger
A ledger is a means of
accumulating in one place all the
information about changes in an
asset, liability, equity, income, and
expense accounts.
A sample of the general ledger
is shown below
Determining the Balance of a T-Account Shown below is the
Chart of Accounts discussed in ABM1 Chapter 8 (Types of Major
Accounts)
 In order to determine the ending balance of each
account using the “T-account”, the beginning
balance is plot in the appropriate debit or credit side,
then total debits and credits are then determined. If
the account has a beginning balance on the debit
side, all the debits during the period is added to the
beginning then all the credits are deducted.
 There is a debit balance of the account if the sum of
the beginning balance and the total debits exceeds
the total credits.
The normal balances of these accounts
are listed below
 a.Asset Accounts – Debit Balance; however the normal
balance of a contra asset account is credit.
 In the above chart, the contra asset accounts are:
 Allowance for Bad Debts, Accumulated Depreciation
(Accum. Deprn.) – Store Equipment Accum. Deprn. – Off
Eqpt Accum. Deprn – Trans Eqpt Accum. Deprn – Building
b
b. Liability Accounts – Credit Balance
c. Equity Accounts – Owner’s, Capital
account has a normal balance on the credit
side while the Owner’s, Withdrawal account
has a normal balance on the debit side.
d. Income – Credit Balance
 e. Expense – Debit Balance
 When an account that normally has a credit balance
actually has a debit balance, it may mean that an
error have occurred or that an unusual situation may
exist.
 For example the accounts receivable account
normally have a debit balance, if at the end of the
period the actual balance is on the credit side, it may
mean that there was overpayment of the customer or
an error in the recording processed has occurred
Compound Journal Entry
An entry the involved two accounts only, one
debit and one credit is called a simple journal
entry. Some transactions, however, require
more than two accounts in journalizing. An
entry that requires three or more accounts is a
compound entry
 To illustrate: Ariel Garden Supply Store acquire a land for
P800,000. Ariel paid P300,000 cash and issued a
promissory note for the balance.
 To record the above transaction using simple entry:

(1) Land 300,000

Cash 300,000
To record purchased of land by paying cash
 (2)Land 500,000
 Note Payable 500,000

To record purchased of land by issuing promissory

note

To record the above transactions using a compound entry:

Land 800,000
Cash 300,000
Notes Payable 500,000
To record purchased of land by paying cash and
issuance of a promissory note