GRADE

12

ACCOUNTING 2
Work Sheet (Q2, Wk1)

Accounting Books – Journal

and Ledger

Most Essential Learning Competency:

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.
 Activities

Activity 1.1
Title of Activity: Normal Balance of an Account

Objective:
1. Determine the normal balance of every account.
2. Reflect the importance of knowing the normal balance of an account
and how does it affect the preparation of journal and ledger.

Procedure:
A. Write the normal balance (increase) of each account using the T-
Account.
B. Write all your answers in a separate yellow pad paper.

1. Machinery and Equipment

2. Bank Loan
3. Accounts Receivable
4. Prepaid Rent
5. Sales
6. Utilities Expense
7. Accumulated Depreciation – vehicle
8. Owner’s Equity
9. Prepaid Insurance
10. Cash

Critical Thinking Questions: Write all your answers in a separate yellow pad
paper.
1. Why is it important to know the normal balance of an account?
___________________________________________________________________________
___________________________________________________________________________

2. What will be the effect to the Financial Statement the wrong placement
of a normal balance?

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Activity 1.2
Title of Activity: Preparation of Journal, Ledger
and Unadjusted Trial Balance

Objective:
1. Prepare the correct Journal, Ledger and Unadjusted Trial Balance.
2. Learn the use of General Journal and General Ledger
3. Reflect the importance of Journal, Ledger and Unadjusted Trial
Balance as preliminary documents for Financial Statements.
Procedure:
A. Read carefully the following given business transactions of Dayanara
Merchandising and prepare the Journal, Ledger and Unadjusted Trial
Balance.
B. Write your answers in a separate journal and ledger papers or in a
yellow pad paper.
C. Note, all errors to be lessened from a total grade of 100%.

1. Sold merchandise on credit for P5,000, terms 3/10, n/30. The items sold
had a cost of P3,500.
2. Purchased merchandise for cash, P720.
3. Purchased merchandise on credit P2,600, terms 1/20, n/30.
4. Issued a credit memorandum for P300 to a customer who returned
merchandise November 29. The returned items had a cost of P210.
5. Received payment for merchandise sold December 1.
6. Received a credit memorandum for the return of faulty merchandise
purchased on December 4 for P600.
7. Paid freight charges of P200 for merchandise ordered last month (FOB
shipping point).
8. Paid for the merchandise purchased December 4 less the portion that
was returned.
9. Sold merchandise on credit for P7,000, terms 2/10, n/30. The items had
a cost of P4,900.
10. Received payment for merchandise sold on December 24.

Critical Thinking Questions: Write all your answers in a separate yellow pad
paper.
1. How did you find answering the activities?

___________________________________________________________________________

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2. Why is it that we need a careful analysis of business transaction and how
does it affect the Financial Statement?

Remember
• The Journal is a chronological record (day-to-day) of business
transactions. It is called “the book of original entries” because it is the
accounting record in which financial transactions are first recorded.

• There are several types of journal which depends on the nature of the
business operations and the volume of transactions. The simplest type of
and most common is the two-column journal called the General Journal.
It is an all-purpose journal and is unique among the journals in which all
the business transactions may be recorded.

• The process of recording a transaction is called journalizing the

transactions which involves careful analysis of each business transaction.

• Each entry made in this journal includes the following information,

entered in this order:
o The date of the transaction
o The name of the account debited including the amount
o The name of the account credited including the amount
o A posting reference (PR) indicating the account number of the
account
o A brief explanation of the transaction being recorded

• Special Journals are used to speed up and simplify the recording

process. Each special journal is designed to record a particular type of
transaction efficiently and quickly.
o Cash Receipts Journal – used to record all cash that had been
received
o Cash Disbursement Journal – used to record all transactions involving
cash payments
o Sales Journal (Sales on Account Journal) – used to record all sales on
credit (on account)

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 o Purchase Journal (Purchase on Account Journal) – used to record all
purchases of inventory on credit (on account)

• Importance of using a Journal:

o It shows all information concerning a particular transaction
o It provides a chronological record of all the financial events in the
business over time. Tracing of transactions from months or years back
is easier as long as there is a date of the said transaction. The entries
in the journal are arranged by date that makes it necessary to locate
a particular event.

• Journal Entry
o Simple Journal Entry – an entry that involved two accounts only, one
debit and one credit
Example:
Ariel Garden Supply Store acquire a land for P800,000 in cash.
Dr Cr
Land 800,000
Cash 800,000
To record purchase of land by paying cash.

o Compound Journal Entry – an entry that requires three or more

accounts
Example:
Ariel Garden Supply Store acquire a land for P800,000. Paid P300,000
in cash and issued a promissory note for the balance.
Dr Cr
Land 800,000
Cash 300,000
Notes Payable 500,000
To record purchased of land by paying cash and issuance
of a promissory note.

• The Venetian Model

Every transaction entry must have a debit and equal to a credit no
matter how many accounts are affected. This is called the Double Entry
Bookkeeping System or Venetian Model which was introduced by Luca
Pacioli. The transaction must always affect two accounts (example cash
and capital) and at least one or two accounting elements (example
assets only or assets and owner’s equity). The reason is that a transaction
is an exchange of value: one value received and another value parted
with.

• The General Ledger refers to the accounting book in which the accounts
and their related amounts as recorded in the journal are posted to

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periodically. The Ledger is also called “the book of final entry” because
all the balances in the ledger are used in the preparation of Financial
Statements. This is also referred to as the T-Account since the basic form
of a ledger is like the letter “T”, a simplified form of a General Ledger.
o The T-Account is the simplest tool used to analyze the effects of the
transactions on each account, it has two sides – one side for
recording increases and the other side for recording decreases.
o The left part of the T-Account is called the debit side (Dr) and the right
side is called the credit side (Cr). The title of the account is placed
on top.

Example for Cash T-Account:

Cash
Left Side Right Side
Dr Cr

o When an amount is recorded on the left side, it is simply called debit

cash (increase in cash), when recorded on the right side, it is called
credit cash (decrease in cash).
o Some accounts are increased on the debit side while other accounts
increased on the credit side depending on its position in the
accounting equation:

Assets = Liabilities + Owner’s Equity

Assets Liabilities Owner’s Equity

Dr Cr Dr Cr Dr Cr
+ - - + - +

o Rules for Debit and Credit should be observed in processing

transactions:
▪ Increases in assets are recorded on the debit side of the account,
while decreases in assets are recorded on the credit side of the
account.
▪ Increases in liabilities are recorded on the credit side, while
decreases in liabilities are recorded on the debit side of the
account.
▪ Increases in owner’s equity are recorded on the credit side, while
decreases in owner’s equity are recorded on the debit side.

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o Determining the Balance of T-Accounts under Chart of Accounts:

Account Classified by Type of

Code Account Title Major Accounts
Statement of Financial Position Accounts
1000 Cash
1200 Accounts Receivable
1201 Notes Receivable
1202 Allowance for Bad Debts
1300 Inventory
1400 Prepaid Expense
1500 Supplies
1600 Office Equipment
1601 Accumulated Depreciation – ASSETS
Office Equipment
1650 Store Equipment
1651 Accumulated Depreciation –
Store Equipment
1680 Transportation Equipment
1681 Accumulated Depreciation –
Transportation Equipment
1750 Building
1751 Accumulated Depreciation –
Building
1800 Land
1900 Intangible Assets
2000 Accounts Payable
2100 Notes Payable
2200 Accrued Expenses LIABILITIES
2201 Salaries Payable
2202 Utilities Payable
2300 Income Taxes Payable
3000 Owner’s, Capital EQUITY
3100 Owner’s, Withdrawal
4000 Service Revenue INCOME
4100 Sales
4101 Sales Returns & Allowances Income
4102 Sales Discounts
4150 Interest Income
5000 Cost of Sales
5100 Purchases
5101 Purchase Returns & Allowances
5102 Purchase Discounts EXPENSES
5103 Freight In
6100 Salaries Expense
6150 Supplies Expense
6200 Utilities Expense
6220 Communication Expense

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 6250 Travel Expense
6300 Rental Expense
6350 Fuel Expense
6400 Advertising Expense
6410 Delivery Expense EXPENSES
6450 Commission Expense
6500 Depreciation Expense
6600 Taxes and Licenses
6700 Interest Expense

o 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 the 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.

o The normal balances of these accounts are:

▪ Asset Accounts – Debit Balance
▪ Contra Assets – Credit
Examples:
Allowance for Bad Debts
Accum. Deprn. – Store Equipment
Accum. Deprn. – Office Equipment
Accum. Deprn. – Transportation Equipment
Accum. Deprn. – Building
▪ Liability Accounts – Credit Balance
▪ Equity Accounts:
Owner’s Capital – Credit Balance
Owner’s Withdrawal – Debit Balance
▪ Income – Credit Balance
▪ Expense – Debit Balance

o Summary of the Normal Balances of the Accounts:

Increase
Account (Normal Balance) Decrease
Statement of Financial Position Accounts
Asset Debit Credit
Liability Credit Debit
Owner’s Capital Credit Debit
Owner’s Withdrawal Debit Credit
Income Credit Debit
Expense Debit Credit

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 o When an account that normally has a credit balance actually has a
debit balance, it may mean that an error has occurred or than an
unusual situation may exist.
Example: The accounts receivable account normally has 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.

• Posting is the process of recording or transferring accounts from journal

to ledger.

• Use of a General Ledger:

It is a means of accumulating in one place all the information about
changes in asset, liability, equity, income, and expense accounts.

Checking your Understanding

Critical Thinking Questions: Write all your answers in a separate yellow pad
paper.
1. How is business transactions recorded?
_____________________________________________________________________
_________________________________

2. The term debit means increase and credit means decrease. Do you agree
with this statement? Explain why or why not.
_____________________________________________________________________
_________________________________

3. Explain what is double entry in bookkeeping.

_____________________________________________________________________
_________________________________

4. State the rules of debit and credit.

_____________________________________________________________________
_________________________________

5. Explain why the use of the combination journal, compared to the general
journal, would make the work of the accountant lighter.
_____________________________________________________________________
_________________________________

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 Evaluation
Directions: Write the letter of the correct answer in a separate yellow pad
paper.
1. The book of final entry
A. General Journal C. General Ledger
B. Venetian Model D. T-Account

2. This is called the Double Entry Bookkeeping System developed by Fr. Luca
Pacioli.
A. General Journal C. General Ledger
B. Venetian Model D. T-Account

3. It is an entry that involved two accounts only, one debit and one credit
A. Simple Journal Entry C. Posting Entry
B. Journal Entry D. Compound Entry

4. The process of recording or transferring accounts from journal to ledger.

A. Journalizing B. Recording C. Analyzing D. Posting

5. It is the simplest tool used to analyze the effects of the transactions on each
account, it has two sides – one side for recording increases and the other
side for recording decreases.
A. General Journal C. General Ledger
B. Venetian Model D. T-Account

6. Under what account is Accumulated Depreciation – Vehicle

A. Assets B. Liabilities C. Expense D. Owner’s Equity

7. Cost of Sales is under what account?

A. Assets B. Liabilities C. Expense D. Owner’s Equity

8. The following has a normal balance of Debit except:

A. Cash C. Expense
B. Accum. Deprn. - Machine D. Withdrawals

9. The book of original entry is called

A. General Journal C. General Ledger
B. Special Journal D. T-Account

10. The following has a normal balance Credit except:

A. Income B. Liability C. Expense D. Sales

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 Answer Card
10. C
9. A
8. B
7. C
6. A
5. D
4. D
3. A
2. B
1. C

Evaluation

References
Books:
Fundamentals of Accountancy, Business & Management 2 (Teachers Guide)
Zenaida Vera Cruz-Manuel, 21st Century Accounting Process (22nd Ed.),
Raintree Trading & Publishing, Inc.
Nelson S. Abeleda, Simplified Accounting for Single Proprietorship (2009),
Nelson Publications
Internet:

Written by:
EVELYN S. PLAZA, San Juan City Academic Senior High School

For questions or comments, write or call:

Department of Education
Schools Division Office – San Juan City
Pinaglabanan St., San Juan City, Philippines 1500
Telefax: (632) 8451-2699; (632) 8251-2383
Email Address: depedsanjuanrecords@gmail.com
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