BOOKS OF

ACCOUNTS
TWO MAJOR BOOKS
OF ACCOUNTS

✓Journal
✓Leger
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 JOURNAL
• 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 in
the journal is known as the process of
journalizing.
GENERAL JOURNAL
Most businesses, especially large companies,
may adopt different kinds of journals but all
business organization use the most basic type
of journal which is the general journal. The
general journal typically displays the
transaction’s date, account titles and
explanations, references, and respective
amount of corresponding accounts.
 Date Account Titles and Explanation Ref Debit Credit
2023
Mar-01 Cash 101 150,000.00
Mr. Washer, Capital 300 150,000.00
Investment of capital to the business

Mar-03 Organization Expense 625 8,600.00

Cash 101 8,600.00
Payment for business registration fees

Mar-05 Prepaid Insurance 131 20,000.00

Cash 101 20,000.00
Paid insurance premium for the business

Mar-10 Computers 150 40,000.00

Cash 101 40,000.00
Purchase of computer equipment
 LEDGER
• After journalizing the business
transactions in the general journal
and special journals, the company
will now proceed to the process of
posting. Posting involves the
transferring of journal entries to the
ledger accounts to bring together
the effect of the transactions to the
individual accounts of the company.
• The ledger is the grouping of all the
accounts of the company showing its
respective outstanding balances. It is
also called the book of final entry of
accounting transactions. It presents
the changes in specific account
balance like cash, accounts
receivable, etc. All account balance
presented in the financial reports are
derived from the ledger.
TWO TYPES OF LEDGER

✓General Ledger
✓Subsidiary Ledger

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GENERAL LEDGER
The ledger contains all the asset, liability, and owner’s
equity accounts of the company. Unlike journals that
are arranged chronologically (regardless of the
accounts), the ledgers are usually grouped according
to their chart of accounts and arranged according to
the order on how they appear on the financial
statements starting from assets, followed by the liability
accounts, and finally the equity accounts including the
revenues and expenses accounts. The general ledger
shows the amount outstanding on each of the
company’s accounts as of a certain date.
 Cash
Date Expalanation Ref Debit Credit Balance
March 01, 2023 Investment of capital to the business J1 150,000 150,000.00
March 03, 2023 Payment for business registration fees J1 8,600.00 141,400.00
March 05, 2023 Paid insurance premium for the business J1 20,000.00 121,400.00
March 10, 2023 Purchase of computer equipment J1 40,000.00 81,400.00
March 15, 2023 Borrowed additional capital from bank J1 50,000 131,400.00
March 17, 2023 Fee for services rendered J1 15,000 146,400.00
March 30, 2023 Collection of service revenue on account J1 36,700 183,100.00
March 31, 2023 Payment of various expenses J1 27,300.80 155,799.20
March 31, 2023 Owner's withdrawal for his personal use J1 10,000.00 145,799.20
 Accounts Receivable
Date Expalanation Ref Debit Credit Balance
March 20, 2023 Fee for services rendered on account J2 36,700 36,700.00
March 30, 2023 Collection of service revenue on account J2 36,700.00 -

Prepaid Insurance
Date Expalanation Ref Debit Credit Balance
March 05, 2023 Paid insurance premium for the business J3 20,000 20,000.00

Furniture and Fixtures

Date Expalanation Ref Debit Credit Balance
March 11, 2023 Purchase of furniture and fixtures on account J4 15,501 15,500.50
The general ledger aids in knowing the
balances of each of the accounts at any
given time. Unlike the journal, the general
ledger classifies the transactions into
accounts and provides the outstanding
balance of each. Additionally, the general
ledger together with the subsidiary
ledgers, serves as control account to
check for errors and misstatements in
posting. At month-end and year-end, the
company reconciles the balances of its
general ledger and subsidiary ledgers.

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SPECIAL JOURNALS AND
SUBSIDIARY LEDGER

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SPECIAL JOURNALS

- are used to record typical and similar

types of transactions. The number of
special journals managed by a company is
dependent on the type of transactions that
occur frequently.

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 Most common special journals used by the company:

Special Journal Purpose

Used in journalizing all sales of merchandise on
Sales Journal
account
Used in journalizing all cash received (including
Cash Receipt Journal
cash sales)
Used in journalizing all purchase of
Purchase Journal
merchandise on account
Use in journalizing all cash paid (including cash
Cash Payments Journal
purchases)
EXAMPLES

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SUBSIDIARY LEDGER

- is a group of accounts with a similar

characteristics like the accounts payable
and accounts receivable.

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Figure :
Most common types of subsidiary ledgers:

Subsidiary Ledger Purpose

Accounts Receivable Used in tracking individual accounts receivable

Ledger balances of company’s customers.

Accounts Payable Used in tracking individual accounts payable

Ledger balances of company’s creditors.
EXAMPLES

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THANK YOU
Brita Tamm

502-555-0152

brita@firstupconsultants.com

www.firstupconsultants.com