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ABM SS1 – FUNDAMENTALS OF ACCOUNTANCY,

BUSINESS, AND MANAGEMENT

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

MODULE 1 (October 26-31, 2020)

BOOKS OF ACCOUNTS - JOURNALS

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 BOOKS OF ACCOUNTS – JOURNALS
The students will be able to:
 Illustrate the format of a general and special journal.

(Instructor's notes: Book of Accounts is a book where you record all the financial transactions of the business.
Entries in the books of accounts are required to be supported with documents such as official receipts, sales invoices,
vouchers and other related supporting documents evidencing the business transactions occur. Each definition is
accompanied by an illustration.)

In a single day, a company engages in hundreds and thousands of business transactions. Some of these include
cash and credit sales, purchases of inventories, payment of expenses, acquisition of equipment, and many more. A
company should be able to collect and process this financial information in order to summarize them at year-end and to be
able to prepare its annual financial statements for its internal and external users.

To keep track of its transactions more efficiently, companies keep and maintain a set of books and/or records called
books of accounts. Books of accounts are the finance records, ledgers, and journals that compose the company’s accounts.
These serve as a company’s financial memory and comprises of every single business transactions and financial
information of a company. Aside from decision-making and analysis of a business’ performance, books of accounts are also
crucial in ensuring regulatory compliance as they also serve as proof of the business transactions reflected in the financial
statements.

I. TWO MAJOR BOOKS OF ACCOUNT

A. Journals
A journal is a chronological record of all company’s transactions listed by date. It is often referred to
as the book of original entry. This is because we first record the business transaction in this book. The
recording of financial information into the journal is known as the process of journalizing.

TWO TYPES OF JOURNALS

1. General Journals – wherein all business transactions are recorded in chronological

Example of General Journal

DATE ACCOUNT TITLES AND EXPLANATION REF DEBIT CREDIT

2016
January 1 Cash 101 200,000.00
Shayne, Capital 301 200,000.00
Owner's investment of cash in the business

January 2 Property, Plant & Equipment 140 50,000.00

Shayne, Capital 301 50,000.00
Owner's investment of equipment in the business

January 3 Inventory 121 20,500.00

Parts of General Journal
Cash 101 20,500.00
Purchase of inventories from suppliers through cash

January 4 Accounts Receivable 111 50,000.00

Sales 400 50,000.00
Sale of inventories to customer on account

Cost of Good Sold 500 15,000.00

Inventory 121 15,000.00
Sale of inventories to customer on account

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 a) Date – a transaction occurred
b) Account Titles and Explanation – the account to be debited and the account to be credited are
recorded. The account titles are referenced to the Charts of Accounts. Correct and proper usages
of the account titles are necessary for a clear and accurate presentation of amounts in the financial
statements. Also, a brief explanation of the business transaction is described.
c) Reference Number – reference number of each account journalized. The Ref column is left blank
during the journalizing process and is filled out during the posting process.
d) Debit – corresponding amount of the account is entered.
e) Credit – corresponding amount of the account is entered.

2. Special Journals – used by large companies for recurring transactions such as sales on account and
purchases of merchandise on accounts
– Some of the most common special journals used by companies are shown below.

A. Sales Journal - Used in journalizing all sales of merchandise on account

Example of Sales Journal:

SALES JOURNAL S1
Invoice Dr. Accounts Receivable,
Date Account Debited Ref
No. Cr. Sales
2015
March 1 Castro, Inc. 101  200,000.00
5 Esguerra & Co. 102  650,000.00
12 Rosuman Corp. 103  340,000.00
20 Lugtu, Inc. 104  630,000.00
25 KSLC General Partnership 105  345,000.00
26 EMR & Co. 106  856,000.00
Reginald and Joseph's Sari-sari
31 Store 107  452,000.00
3,473,000.00

Parts of Sales Journal

a. Special Journal Title – The name of the special journal (Sales Journal)
b. Special Journal Reference Number – Reference number of the special journal that is used
during posting to the ledgers.
c. Date – The date at which the transaction occurred.
d. Account Debited – Each of the company’s individual customers is shown. This will be
helpful during the posting process to the subsidiary ledgers.
e. Invoice Number – Pre-numbered invoices transactions are journalized
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 f. Reference – A check mark is inputted under this column when postings are made in the
ledger. This is to ensure all transactions are posted and, at the same time, to prevent double
posting.
g. Dr. Accounts Receivable, Cr. Sales – Since all transactions in each special journals are of
the same type, explanations of transactions in each journal entry are eliminated. In our
example, it is shown that all the transactions inputted in the sales journal include a debit to
accounts receivable and a credit to sales. Under this column, the respective amounts of each
transaction are entered.
h. Total – At the end of each month, the total is computed. This will then be posted to the
general ledger rather than the individual entries. This saves time and, at the same time,
reduces the responsibilities of errors in posting.

B. Cash Receipts Journal - Used in journalizing all cash received (including cash sales)

Example of Cash Receipt Journal

CASH RECEIPT JOURNAL CR1

Cr. Accounts Cr. Other
Date Account Credited Ref Dr. Cash Receivable Cr. Sales Accounts
2015
March 1 Krystel, Capital 200,000.00 200,000.00
2 Rosuman, Corp. 750,000.00 750,000.00
6 KSLC General Partnership 30,000.00 30,000.00
30 CastroCute & Co. 25,000.00 25,000.00
1,005,000.00 30,000.00 775,000.00 200,000.00

Parts of Cash Receipt Journal

a. Special Journal Title – The name of the special journal (Cash Receipts Journal)
b. Special Journal Reference Number – Reference number of the special journal that is used
during posting to the ledgers.
c. Date – The date at which the transaction occurred.
d. Account Credited – The account that is credited with reference to the chart of accounts.
e. Reference – it is blank upon journalizing and is filled out during the posting process. A check
mark is inputted under this column when postings are made in the ledger.
f. Dr. Cash – The corresponding amount of cash debited is entered.
g. Cr. Accounts Receivable, Sales, Other Accounts – The respective amount credited is
entered
h. Totals – These will be posted to the general ledger rather than the individual entries.

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 C. Purchase Journal - Used in journalizing all purchases of merchandise on account

Example of Purchase Journal

PURCHASES JOURNAL P1
Dr. Merchandise Inventory,
Date Account Credited Terms Ref
Cr. Accounts Payable
2015
March 3 Rachel and Ross Merchandising 2/10 n/30 213 20,000.00
4 ChanTheMan Inc. 4/15 n/30 203 10,000.00
8 Monicuh Corp. 1/20 n/30 206 5,500.00
25 PheebsSleeves Inc. 2/10 n/30 214 21,000.00
26 Joey Tribianni Co. 5/15 n/30 207 12,000.00
28 Gunther Inc. 3/10 n/30 216 9,000.00
77,500.00

Parts of Purchase Journal

a. Special Journal Title – The name of the special journal (Purchase Journal)
b. Special Journal Reference Number – Reference number of the special journal that is used
during posting to the ledgers.
c. Date – The date at which the transaction occurred.
d. Account Credited – The Company’s individual suppliers are shown. This will be helpful
during the posting process to the subsidiary ledgers.
e. Terms – Suppliers usually provide discounts on its regular customers. The payment term
include the discount rate, discount period, and the payment period. For example, “2/10 n/30”
indicates a 2% discount if paid within 10 days; otherwise, the payment should be made
within 30 days.
f. Reference – This column is left blank upon journalizing and is filled out with a check during
the posting process to ensure all transactions are posted and to eliminate double postings to
the ledger.
g. Dr. Merchandise Inventory, Cr. Accounts Payable – The purchases journal contains all
purchases on account. All the transactions inputted in the purchase journal include a debit to
Merchandise Inventory and a credit to Accounts Payable. Under this column, the respective
amounts of each transaction are entered.
h. Total – At the end of each month, the total is computed. This will then be posted to the
general ledger rather that the individual entries. This saves time and, at the same time,
reduces the possibilities of errors in posting.

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 D. Cash Payments Journal - Used in journalizing all cash paid (including cash purchases)

Example of Cash Payments Journal

CASH PAYMENTS JOURNAL CPJ1

Dr. Accounts Dr. Other
Date Check No. Account Debited Ref Cr. Cash
Payable Accounts
2015
March 1 1071 Walter White Ltd. 40,000.00 40,000.00
2 1072 PinkMan Corp. 34,000.00 34,000.00
4 1073 Walter Junior Inc. 28,000.00 28,000.00
7 1074 Property, Plant & Eqpt. 120,000.00 120,000.00
19 1076 Supplies Expense 45,000.00 45,000.00
20 1077 Merchandise Inventory 23,000.00 23,000.00
102,000.00 188,000.00 290,000.00

Parts of Cash Payment Journal

a. Special Journal Title – The name of the special journal (Cash Payments Journal)
b. Special Journal Reference Number – Reference number of the special journal that is used
during posting to the ledgers.
c. Date – The date at which the transaction occurred.
d. Check No. – The corresponding check numbers of each cash payment are recorded to
maintain a record of the disbursed check.
e. Amount Debited – The account that is debited.
f. Reference – This column is left blank upon journalizing and is filled out with a check during
the posting process to ensure all transactions are posted and to eliminate double postings to
the ledger.
g. Dr. Accounts Payable, Other Accounts – The respective amount debited is entered.
h. Cr. Cash – The corresponding amount of Cash credited is entered.
i. Totals – These will be posted to the general ledger rather than individual entries.

EXAMPLE OF A COMPLETE TRANSACTION

Shayne opened a merchandising business, January 1, 2020. The following transactions were completed during the month;

January 1 Shayne invested 200,000 to her company named Sy Merchandizing.

January 2 Thea invested equipment to her business worth 50,000.
January 3 Purchase different kinds of bags to Baby C., 20,500 from suppliers through cash.
January 4 Marie bought different bags from Sy Merchandizing on account, 50,000.
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 Assumed that the sale of bags is worth 15,000.
January 8 Purchase different kinds of shoes to ABC Company, 40,000 on account
January 10 Release of approved loan from XYZ Bank, 50,000
January 12 Lucky bought all the stocks of shoes at Sy Merchandizing at the price of 60,000.
January 14 Collect 24,000 from Marie.
January 15 Lucky returned some damaged shoes, 5,000
Assumed that the returned shoes are worth of 1,000 in inventory.
January 25 A partial payment of 10,000 to ABC Company.
January 30 Shayne withdraw 2,000 for personal use.
January 31 Paid 5,000 salaries to employees for the month.

ENCODED TO GENERAL JOURNAL, AS FOLLOWS:

GENERAL JOURNAL
DATE ACCOUNT TITLES AND EXPLANATION REF DEBIT CREDIT
2020
January 1 Cash 101 200,000.00
Capital 301 200,000.00
Owner's investment of cash in the business

January 2 Property, Plant & Equipment 140 50,000.00

Capital 301 50,000.00
Owner's investment of equipment in the business

January 3 Inventory 121 20,500.00

Cash 101 20,500.00
Purchase of inventories from Baby C. through cash

January 4 Accounts Receivable 111 50,000.00

Sales 400 50,000.00
Sale of inventories to Marie on account

Cost of Good Sold 500 15,000.00

Inventory 121 15,000.00
Sale of inventories to Marie on account

January 8 Inventory 121 40,000.00

Accounts Payable 201 40,000.00
Purchase of inventories from ABC Company on account

January 10 Cash 101 50,000.00

Accounts payable 201 50,000.00
Cash loan from XYZ Bank

January 12 Cash 101 60,000.00

Sales 400 60,000.00
Sale of inventories to Lucky

Cost of Good Sold 500 40,000.00

Inventory 121 40,000.00
Sale of inventories to Lucky

January 14 Cash 101 24,000.00

Account Receivable 111 24,000.00
Collection of Marie's accounts receivable

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January 15 Sales Return 401 5,000.00
Accounts Receivable 111 5,000.00
Return of merchandise from Lucky

Inventory 121 1,000.00

Cost of Good Sold 500 1,000.00
Return of merchandise from Lucky

January 25 Accounts Payable 201 10,000.00

Cash 101 10,000.00
Payment of accounts payable to ABC Company

January 30 Capital Drawing 302 2,000.00

Cash 101 2,000.00
Withdrawal of cash from the business fo her personal use

January 31 Salaries Expense 505 5,000.00

Cash 101 5,000.00
Paid salaries to employees for the month

ASSESSMENT:

Direction: Analyze the following transaction then make a general journal using the following accounts and
reference numbers:
101 Cash 302 Capital Drawing
111 Accounts Receivable 400 Sales
121 Inventory 401 Sales Return
140 Property Plant and Equipment 500 Cost of goods sold
201 Accounts Payable 501 Rent Expense
301 Capital 505 Salaries Expense

In January 2020 DJ Lee started his business of selling siopaos known for its bigger-than-normal-size called Loisiopao.
During its first month he encountered the following transaction:

January 1 DJ invested 250,000 in the business.

Purchase siopao from ABC on account, 130,000.
January 2 Sale of siopao to Pau through cash, 25,000.
Assumed that the value of the product form the inventory, 5,000.
January 3 Sale of siopao to Siony on account, 75,000.
Assumed that the value of the product form the inventory, 15,000.
January 10 Collection of receivable from Siony, 10,000
January 12 A partial payment to ABC, 45,000.
January 15 Paid rent expense for the month, 15,000.
January 18 Sale of siopao to Anya on account with 50% down payment, 175,000.
Assumed that the value of the product form the inventory, 35,000.
January 20 Purchase siopao from XYZ on account with 30,000 down payments, 35,500.
January 31 DJ put additional cash for investment, 15,000.

REFERENCE

 FUNDAMENTALS OF ACCOUNTANCY, BUSINESS, AND MANAGEMENT 1; REX BOOK STORE; BY

JOSELITO G. FLORENDO

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