JOURNALIZING

INFORMATION SHEET 1.3-1

What is a Double-Entry System of
Bookkeeping?
Double-Entry System of Bookkeeping
The double-entry system of bookkeeping recognizes the
two-fold effects of a transaction; the value received (debit)
and the value parted with (credit). This justifies the equality
of debit and credit amounts. Because of the two-fold effect
recognition, both sides of the fundamental equation will
always be equal.
 Concepts of Journalizing
Journalizing is the act of recording transactions for the first
time in an accounting record book called the journal. The
journal is often referred to as “book of original entry”.
Journalizing is the first step in the accounting cycle. It is the
process of recording business transactions in a journal.
What are books of accounts?
 Books of Accounts
The records that are used and kept by the business in storing
all its accounting data are called “books of accounts.” There
are two sets of books that are used by the business.
They are the “books of original entry” otherwise known as
the “journal” and the “books of final entry” or the
“ledger” .
 “Books of Original Entry”
Also known as Journal. It is the accounting book wherein
the business transactions and events are recorded for the first
time. The simplest form of journal is the two-column
journal. There are various kinds of journal records and they
are called “special journals.”
 Functions of Journal
1. To show all information about an accountable event in
one place.
2. To provide a chronological record of accountable events.
3. To facilitate posting transactions data to the ledger.
 Types of Journal
1. General Journal – is a business document in which transactions are
recorded, the date of transaction, the accounts to be debited and
credited, the amount of debit or credit, entries and explanation of each
transaction.
2. Special Journal – a chronological recording of transactions possessing
common characteristics. Examples are:
a. Sales Journal
b. Purchases Journal
c. Cash Receipts Journal
d. Cash Disbursement Journal
 Advantages of Special Journal
1. Eliminate repetitive work.
2. Makes possible division of labor and hence, timely reports.
3. Results in higher degree of control.
4. Results in greater efficiency.
Special Journal
Special Journal
Special Journal
Special Journal
 Special Journal
a. Sales Journal - only transactions involving “sale of merchandise on account
“are recorded in this book or wherever a charge invoice is issued to a
customer.
b. Purchases Journal - only transactions involving “purchase of merchandise
on account” are recorded in this book or wherever we received a charge
invoice from supplies.
c. Cash Receipts Journal - only transaction involving “receipts of cash” are
recorded in this book or whenever Cash Invoice or Official Receipt issued to
a customer.
d. Cash Disbursement Journal - only transaction involving “cash payments” are
recorded in this book.
General Journal
 General Journal
Even special journals are used, a General Journal will still be used but it is limited
to recording of transactions which cannot be recorded in the above mentioned
books. In other words, only transactions that cannot be entered in a Special
Journal are recorded in the General Journal.
Examples of transactions that are recorded in the General Journal are as follows:
• Original investment of the owner.
• Return of merchandise bought on account.
• Return of merchandise by a customer that was sold on account.
• Adjusting and correcting journal entries.
• Closing and Reversing Entries.
 Steps in recording a transaction in a
journal or procedure in journalizing:
Step 1 – Record the date.
GENERAL JOURNAL PAGE __
DATE ACCOUNT NAME AND DESCRIPTION REF DEBIT CREDIT
Jan 5 Debit entry      
    Credit entry      
    Description      
           
  12 Debit entry      
    Credit entry      
    Description      
           
  15 Debit entry      
    Credit entry      
    Description      
           

Feb 14 Debit entry      

    Credit entry      
    Description      
           
 Steps in recording a transaction in a
journal or procedure in journalizing:
Step 2 and 3 – Record the debit and the credit.

GENERAL JOURNAL PAGE __

DATE ACCOUNT NAME AND DESCRIPTION REF DEBIT CREDIT
Jan 5 Cash 50 000   
    Mr. A, Capital   50 000 
         
           
 Steps in recording a transaction in a
journal or procedure in journalizing:
Step 4 – The explanation is written on the next line after the last credit
entry.

GENERAL JOURNAL PAGE __

DATE ACCOUNT NAME AND DESCRIPTION REF DEBIT CREDIT
Jan 5 Cash 50 000   
    Mr. A, Capital   50 000 
    To record initial investment of the owner.      
           
 Steps in recording a transaction in a
journal or procedure in journalizing:
Step 5 – Between entries there must be left single-line spacing.

GENERAL JOURNAL PAGE __

DATE ACCOUNT NAME AND DESCRIPTION REF DEBIT CREDIT
Jan 5 Cash 50 000   
    Mr. A, Capital   50 000 
    To record initial investment of the owner.      
           
8 Supplies Inventory 10 000
Accounts Payable 10 000
To record purchase of supplies on account.
 Steps in recording a transaction in a
journal or procedure in journalizing:
Step 6 – The folio (“F” or Post –reference column or Reference column) is
used to indicate the account number in the ledger to which the entry is
transferred.

GENERAL JOURNAL PAGE __

DATE ACCOUNT NAME AND DESCRIPTION REF DEBIT CREDIT
Jan 5 Cash 101 50 000   
    Mr. A, Capital 300   50 000 
    To record initial investment of the owner.      
           
 Two types of journal entries:
1. Simple entry – contains one debit and one credit.
Example:
Cash P xxx
Mr. X, Capital P xxx
To record initial investment.
 Two types of journal entries:
2. Compound entry – contains three or more accounts.
Example:
Cash P xxx
Furniture xxx
Mr. X, Capital P xxx
To record initial investment.
 What is an opening entry?
An entry recording the initial investments of the owner is called
an “opening entry.” The first entry made in the general journal is
called an opening entry. An opening entry will only occur once
in the life of the business. This constitutes either the recording of
the initial investments of a proprietor who engaged in the
business for the first time or the recording of the beginning
balances of accounts in preparation for the next annual
accounting period.
 What is an opening entry?
Mr. A just started to set up his business and initially invested the following;
P15,000 in Cash, P3,000 worth of Office Supplies, P40,000 worth of Computer
Equipment, and an Office Building amounting to P55,000.
 What is an opening entry?

GENERAL JOURNAL PAGE __

DATE ACCOUNT NAME AND DESCRIPTION REF DEBIT CREDIT
Jan 5 Cash   15 000  
    Office Supplies   3 000  
    Computer Equipment   40 000  
    Office Building   55 000  
    Mr. A, Capital     113 000
    To record initial investment of the owner.      
           
 What is Chart of Accounts?

Chart of Accounts is a list of account titles prepared

beforehand to guide the bookkeeper and accountant of
what specific titles are to be used in describing the
exchanges of values in a transaction.
Sample arrangement of Chart of
Accounts:
WELCOME LAUNDRY SHOP
Chart of Accounts
Account    
Nos. Account Names    
101 Cash    
112 Accounts Receivable    
126 Supplies    
157 Equipment    
201 Accounts Payable    
206 Unearned Revenue    
301 Dee Ka Mao, Capital    
306 Dee Ka Mao, Drawings    
426 Laundry Revenue    
726 Salaries Expense    
732 Utilities Expense