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Distance Education
Instructional Module

ABM Track 2: Fundamentals of Accountancy, Business and Management 1

Subject Teacher: Ms. Cleth A. Dizon-Bulaong, CPA

FABM 1 Unit 2: The Accounting Equation

Week 5: Books of Accounts

MY JOURNEY

In the previous module, you were able to understand and learn the accounting equation
and how simple transactions affect the ending balances of each major account. The taxing
authority in the Philippines, Bureau of Internal Revenue, mandates that all businesses or
persons, required by law, to pay internal revenue taxes shall keep permanently-bound books
of accounts for registration or stamping. This chapter discusses the major types of books of
accounts which are journals and ledgers.

MY TARGETS

At the end of this lesson, you will be able to:

a. Identify the uses of the two books of accounts;
b. Illustrate the format of general and special journals; and
c. Illustrate the format of general and subsidiary ledgers.

Day 1:
1. Warm-up: Continuing Jose’s photocopying business

Day 2:
1. Task 7: Uses of Journals and Ledgers
2. Test Yourself: Format of Journals and Ledgers
3. Connecting What You’ve Learned: Christian Values Required

MY WARM-UP

Jose Mercado needs to present his financial information through financial statements
to interested users of JM Photocopying Center. In order to do this, the business needs to
maintain books of accounts which are used to record all business transactions and classify the
accounts accordingly so that financial reports can be prepared. This implies that increases and
decreases in the basic accounting equation should be reflected in JM Photocopying Center’s
books of accounts and are used as reference in preparing financial statements.

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 ABM Track 2: Fundamentals of Accountancy, Business and Management 1
Subject Teacher: Ms. Cleth A. Dizon-Bulaong, CPA

Question: How many books of accounts do you think JM Photocopying Center needs?
What will be the purpose of each book of account?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

READ TO DISCOVER

Week 5 Day 1

Books of Accounts

Books of accounts are records in which all accounts and transactions of a business are
maintained on a regular basis. These books of accounts are typically a journal and a ledger or
their equivalents such as subsidiary ledgers and simplified books of accounts.

The two major types of books of accounts are journal and ledger.

I. 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 book of original entry. For
each transaction, the journal shows the debit and credit effects on specific accounts.

The journal makes several significant contributions to the recording process:

 It provides a systematic and chronological record of transactions;
 It simplifies the ledger as some details in the journal need not be written in the
ledger;
 It provides adequate explanation of each entry and presents necessary
information about the transactions such as the account debited and credited and
related amounts;
 It ensures that the double-entry bookkeeping system is observed when recording
transactions; and
 It helps in solving misunderstanding in business because it serves a proof and
legal evidence of transactions.

There are two types of journals: the general journal and the special journal.

GENERAL JOURNAL
The general journal is the most basic journal. A general journal includes the following
information: a) the title “General Journal”; b) page number; c) date of transaction; d)

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 ABM Track 2: Fundamentals of Accountancy, Business and Management 1
Subject Teacher: Ms. Cleth A. Dizon-Bulaong, CPA

particulars column; e) reference (folio/posting-reference) column; f) debit money column; and

g) credit money column.

Shown below is an example of a general journal and a sample entry for a purchase of
office supplies in cash for ₱1,500 on January 15, 2020:

General Journal GJ1

Date Particulars Ref Debit Credit
1/15/2020 Office Supplies Expense 1,500
Cash 1,500
To record office supplies bought in
cash from China Mart, Inc. OR#10001

Journalizing process
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 “Particulars,” 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 “Particulars,” 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.

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 used.

The following are the commonly used special journals:

I. Cash Receipts Journal – used to record all cash that has been received
Cash Receipts Journal CRJ1
Dr Dr Cr Dr (Cr)
Date OR# Received From Ref
Cash Sales Discount Sales Accts. Rec

 The date of the transaction is entered in the date column.

 The OR number issued and the source of cash receipt is entered in the second and
third columns, respectively.

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 ABM Track 2: Fundamentals of Accountancy, Business and Management 1
Subject Teacher: Ms. Cleth A. Dizon-Bulaong, CPA

 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.
 The debit Cash column represents the amount of cash received for a particular
transaction.
 If applicable, debit sales discounts column is also provided.
 Major categories of receipts, such as cash sales and collection of accounts
receivable are provided with separate columns. These transactions are frequent and
repetitive items, therefore a separate column is provided.

II. Cash Disbursements Journal – used to record all transactions involving cash
payments
Cash Disbursements Journal CDJ1
Check (Dr) Cr Dr Cr Cr
Date Paid To Ref
Voucher # Accounts Payable Purchases Purchase Discount Cash

 The date of the transaction is entered in the date column.

 The check voucher number and paid to is entered in the second and third columns,
respectively.
 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. The Check or Voucher number represents the
identifying number of the check issued for the related cash payment.
 Major categories of disbursements, such purchases and settlement of accounts payable
are provided with separate columns. These transactions are frequent and repetitive
items, therefore a separate column is provided.
 If applicable, credit purchase discounts column is also provided.
 The credit cash column represents the amount of cash paid for a particular transaction.

III. Sales Journal – used to record sales of merchandise on account

Only the transactions which involve a debit to Accounts Receivable and a credit to
Sales are recorded in this journal. The source document for this journal is the charge invoice
or sales invoice (for credit transactions) to various customers or clients. An example of a sales
journal is shown below:
Sales Journal SJ1
Dr Cr
Date Invoice # Customer Name Ref
Accounts Receivable Sales

 The date of the transaction is entered in the date column.

 The invoice number, which represents the identifying number of the source
document issued to the customer when the sale was made, and the customer name
is entered in the second and third columns, respectively.

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ABM Track 2: Fundamentals of Accountancy, Business and Management 1
Subject Teacher: Ms. Cleth A. Dizon-Bulaong, CPA

 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.
 The debit Accounts Receivable and credit Sales columns represent the amount of
the sale transactions indicated in the charge invoice.

IV. Purchase Journal – used to record all purchases of inventory on credit (or on
account)
The Purchase Journal is used to record recurring transactions of purchases on account.
The source documents for purchase journal are the invoices from the suppliers of the
company. An example of a Purchase Journal is shown below:
Purchases Journal PJ1
Invoice #/ Dr Cr
Date Billing Vendor Name Ref
Statement Accounts Receivable Sales

 The date of the transaction is entered in the date column.

 The invoice number/billing statement (from suppliers), which represents the
identifying number of the source document issued by the supplier when the items,
goods or merchandise were delivered to the company when the purchase was
made, and the vendor/supplier name is entered in the second and third columns,
respectively.
 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.
 The debit Purchases and credit Accounts Payable columns represent the amount of
the goods purchased as indicated in the charge invoice from the supplier.

Special Journal vs. General Journal

The use of special journals, in addition to the general journal,
provides the following advantages:
a. It promotes division of labor;
b. It saves time in journalizing transactions;
c. It saves time in posting transactions; and
d. It aids in decision-making.

Week 5 Day 2

II. Ledger
A ledger is a collective record of individual accounts used by the business. It is used to
sort all entries made in the journal in chronological order and group all transactions that affect
individual transactions in order to facilitate the preparation of financial statements. The ledger
is also called the ‘book of final entry’ since the basis of information in the ledger comes from
the journal. It provides the last record of financial information before the financial reports are
prepared.

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ABM Track 2: Fundamentals of Accountancy, Business and Management 1
Subject Teacher: Ms. Cleth A. Dizon-Bulaong, CPA

There are two kinds of ledgers, namely, the general ledger and the subsidiary
ledgers.

GENERAL LEDGER
The general ledger (GL) is a grouping of all accounts used in the preparation of
financial statements. The GL is a controlling account because it summarizes all the activities
that have taken place as recorded in its subsidiary ledger.
The GL is used to accumulate and classify individual transactions from the journal.
The format of a general ledger is shown below:

Account Account No.

Date Particular Ref Debit Credit Balance

 The account portion refers to the account title for example: cash, accounts
receivable.
 The account number is an assigned number in the chart of accounts for each
account title to facilitate ease in recording and cross-referencing.
 The date column identifies when the transaction happened.
 The particular represents the nature of the transactions.
 The reference identifies the page number of the general or special journal from
which the information was taken.
 The debit and credit columns are used in recording the amount of transactions
from the general journal or special journal.
 The balance column represents the running balance of the account after
considering the debit and credit amounts. If the running balance amount is
positive, the account has a debit balance whereas if it has a negative running
balance, the accounts has a credit balance.

SUBSIDIARY LEDGER
A subsidiary ledger is a group of like accounts that contains the independent data of a
specific general ledger. A subsidiary ledger is created or maintained if individualized data is
needed for a specific general ledger account.
Just by looking at the subsidiary ledger, the business knows at a glance how much it
owes others and how much others owe to it. An example of a subsidiary ledger (for accounts
payable) is shown below:
Accounts Payable – (Name of Vendor) Vendor No.
Date Particular Ref Debit Credit Balance

 The upper portion indicates the name and address of the vendor/supplier/customer.
 The vendor/customer number is an assigned number for each vendor/customer as
reference in keeping the records of a supplier/customer.
 The date column identifies when the transaction happened.
 The particular column describes the nature of transaction.

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ABM Track 2: Fundamentals of Accountancy, Business and Management 1
Subject Teacher: Ms. Cleth A. Dizon-Bulaong, CPA

 The reference identifies the page number of the general our special journal from
which the information was taken.
 The debit and credit columns reflect the various effects of every transaction to the
record of the vendor/supplier/customer.
 The balance column provides the running balance of every
vendor/supplier/customer.

Take note that the total running balance for all subsidiary ledgers should equal the
Accounts payable general ledger.
Example:
Accounts Payable Account No. 2001
Date Particular Ref Debit Credit Balance
1/15/2020 Purchase of office furniture PJ1 15,000 15,000
1/20/2020 Purchase of office supplies PJ1 3,500 18,500
1/27/2020 Payment of office supplies CDJ 3,500 15,000
1/20/2020 1

Accounts Payable – Mandaue Foam Vendor No. 0001

Date Particular Ref Debit Credit Balance
1/15/2020 Purchase of office furniture PJ1 15,000 15,000

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ABM Track 2: Fundamentals of Accountancy, Business and Management 1
Subject Teacher: Ms. Cleth A. Dizon-Bulaong, CPA

Accounts Payable – China Mart, Inc. Vendor No. 0002

Date Particular Ref Debit Credit Balance
1/20/2020 Purchase of office supplies PJ1 3,500 3,500
1/27/2020 Payment of office supplies CDJ 3,500 0
1/20/2020 1

If you notice, the total subsidiary ledgers of accounts payable (from Mandaue Foam
anf China Mart, Inc.) shows the same balance as in the general ledger of Accounts Payable
amounting to ₱15,000 (unpaid balance to Mandaue Foam).

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ABM Track 2: Fundamentals of Accountancy, Business and Management 1
Subject Teacher: Ms. Cleth A. Dizon-Bulaong, CPA

REFERENCES

Haddock, M., Price, J., & Farina, M. (2012). College Accounting: A Contemporary Approach 2nd Ed.,
New York: McGraw-Hill/Irwin
Horngen, C.T, Harrison Jr., W.T, & Oliver, M. (2012). Accounting (9 th edition). Prentice Hall
Rabo, Tugas, Salendrez (2016). Fundamentals of Accountancy, Business and Management. Quezon
City, Philippines: Vibal Group Inc.
Valencia, E. and Roxas, G. (2009). Basic Accounting, 3rd ed. Valencia Education Supply
Valencia, E.G. &Roxas, G.F. (2010). Basic Accounting 3rd ed. Mandaluyong City, Philippines:
Valencia Educational Supply.
Valix, Conrado T. et.al. (2015). Financial Accounting, Vol. 1, First part. GIC Enterprises & Co. Inc.
Weygandt, J. et. al. (2012) Accounting Principles 10th ed. John Wiley & Sons (Asia) Pte. Ltd.
Wild, J. (2009). Principles of Accounting 19th ed. McGraw Hill Publishing

Icons and graphics attributed from the artists of , , and .

PRAYER FOR THE BEATIFICATION OF

VENERABLE MOTHER CONSUELO BARCELO
(Co-foundress of the Augustinian Sisters of Our Lady of Consolation in the Philippines)

God of Love and Compassion, You endowed Venerable Mother Consuelo with great love and
zeal for Your honor and glory. We commend to You her life and example of love of
God and neighbor. With faith and trust in Your gracious providence, we pray for her
beatification specially that she may continue to inspire us in seeking Your will and
living a holy life. God of mercy, we also humbly present to You our need, united with
the confirmation of the holiness of life of Venerable Mother Consuelo.
(Silently mention your intentions)
In gratitude for your boundless blessings, we praise and thank you,
Our God, Father, Son and Holy Spirit. Amen.

Our Lady of Consolation, pray for us.

Our great father, St. Augustine, pray for us.
Mother Rita, Venerable Mother Consuelo, and all deceased Sisters, Priests and Brothers,
intercede for us.
MY HEART IS RESTLESS, UNTIL IT RESTS IN YOU, O LORD.

Prepared by:

MS. CLETH A. DIZON-BULAONG, CPA

FABM1 Subject Teacher

Checked by: Approved by:

MR. RHON DAVE P. SUAREZ, MBA MR. MANUEL DELUMPA, JR., LPT, MAED
ABM Track Chair SHS Assistant Principa

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ABM Track 2: Fundamentals of Accountancy, Business and Management 1
Subject Teacher: Ms. Cleth A. Dizon-Bulaong, CPA

Task 7

Name: ________________________________ Grade and Section:

______________________

Identification: Uses of journals and ledgers/ Write “J” if that statement refers to a use of the
journal and “L” if it refers to use of a ledger.

1. It provides information about the financial health of business.

2. It ensures that double-entry bookkeeping system is observed when
recording transactions.
3. It provides a more reliable evidence of transactions.
4. It assists in tracking the flow of business transactions for a given period of
time.
5. It provides adequate explanation of each entry.
6. It assists Management in monitoring business performance.
7. It provides a systematic record of transactions.
8. It presents necessary information about the transactions.
9. It provides information about the results of business operations.
10. It shows detailed information about specific assets, liabilities, and owner’s
equity of the business.

TEST YOURSELF

Short Case Study: In groups of 2 or 3, provide the requirements asked below. You may use a
separate paper for your answers and only one member of the group shall pass the output on
behalf of the group. Answers may be hand-written or printed out. Make sure there are no
duplicate answers in the whole class.

Any data needed in this activity may be gathered either using the Internet, text books,
or any business owners you or your group mates personally know. Do not do any physical
contact if ever you need to do an interview for this exercise. Conduct interviews virtually.

Requirements:
1. Illustrate the format of a general journal being used by an actual business.
2. Does the business use special journals? If yes, illustrate the format/s of the special
journal/s used.
3. Illustrate the format of a general ledger being used by an actual business.
4. Does the business use subsidiary ledgers? If yes, illustrate the format/s of the
subsidiary ledger/s used.

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ABM Track 2: Fundamentals of Accountancy, Business and Management 1
Subject Teacher: Ms. Cleth A. Dizon-Bulaong, CPA

CONNECTING WHAT I LEARNED

As an LCCian, what do you think are the most important Christian values required in
recording business transactions correctly?

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