THE RECORDING

PROCESS
Single Entry vs Double Entry
Bookkeeping
 Single-entry bookkeeping – is a record-
keeping system wherein the two-fold effects
of a transaction are not taken up in the records
all the time. In some cases, only the value
received or will be received is recorded.
-commonly used by small business entities,
by individual businessmen and professionals,
by non-profit entities as well as those entities
which cannot afford to hire or retain a regular
bookkeeper.
Double-entry bookkeeping- is a record-
keeping system that considers the two-
fold effects of a transaction resulting to
the sum of debit side amounts that should
equal to the sum of the credit side
amounts.
Steps in the Accounting Cycle
RECORDING PROCESS
The recording process begins with the
occurrence of a transaction. Source
documents provide written evidence of a
transaction and are used by accounting
department as support for entries
recorded.
Source Documents
Official Receipts
Sales invoice and purchase invoice
Credit memorandum
Promissory note
Purchase order
Receiving report
Check
Cash register tape
Statement of account
Bill of lading
General Journal
A journal is a chronological record of
transactions entered into by a business. It
is also known as the book of original
entry because it is where transactions first
enter the accounting books.
Journalizing
It is t process of recording transactions in a
journal. A complete journal entry contains
the following information about each
transaction.
1. The date
2. Debit part (name of account
debited)
3. Credit part (name of account
credited)
4. An explanation of the transaction
Opening entry- is the first entry made in
the general journal. It is the recording of
initial investments of a proprietor who is
engaged in the business for the first time,
or the recording of the beginning balances
of accounts in preparation for the next
accounting period..
Simple entry- if an entry involves only
two accounts, one debit and one credit.
Compound entry- if an entry involves
more than two accounts in journalizing.
Procedure for recording transactions in
the General Journal
1.
2.
3.
4.
Merchandising Operations
A merchandising business is engaged is
engaged in the buying and selling of
goods or merchandise. It maintains a
merchandise inventory account which is
considered an asset owned by the entity,
thus it has a normal debit balance. They
are in saleable form and the intention of
buying them is to sell it at a profit to the
target customers.
The need for Physical Count
To comply with BIR requirement

To determine the quantity and cost of

inventory on hand at the balance
sheet date and to compute the cost of
goods sold.
Inventory Systems
Periodic (or Physical)
Inventory System

Perpetual Inventory System

Periodic (or Physical) Inventory
System
Periodic inventory system is used by the
business with low priced high volume
nature of merchandise.
Stock cards are not kept nor maintained.
The cost of goods sold is determined only
at the end of an accounting period – that
is, periodically. At that time, a physical
count is taken to determine the cost of
merchandise on hand or unsold.
Perpetual Inventory System
Stock cards (a continuous record of
inventory) will be kept and maintained.
This system will continuously show the
movements of merchandise (its receipt,
issuance or those on hand).
It provides a better control over inventories
than those using the periodic inventory
system although it requires additional
clerical work and additional cost to
maintain the subsidiary records.
Purchase returns and allowances
It is a contra account to purchases and it
has a normal credit balance.
It is shown as a deduction to from gross
purchases.
It is credited when merchandise is
returned to the vendor or supplier due to
defects or damages found at the time of
inspection, wrong specifications, or price
adjustments.
Discount
Is a deduction from the cost of merchandise
acquired.
Two kinds of discounts:

-Trade discount – is a deduction from a

list price or catalog price.

-Cash discount – is a deduction from

the cost of merchandise acquired for
prompt payment of obligation or early
settlement of accounts.
Freight In (Transportation In)
Is an account used for recording the
freight on merchandise bought by the
buyer.
It has a normal debit balance.
The buyer and the seller must agree on
who is responsible for the freight cost and
who bears the risk of loss during transit
for merchandise transactions.
FREE ON BOARD (FOB)
FOB Shipping Point – the freight is the
responsibility of the buyer.

FOB Destination Point – the freight is

paid by the seller until the goods will
reach the destination point which is the
buyer’s place of business.
Freight Prepaid – means that
freight is paid in advance by the
seller.

Freight Collect – means that the

freight is to be paid by the buyer.
 Illustration
Seller’s books Buyer’s books

FOB Shipping point; Freight Accounts Receivable xx Freight-In xx

Prepaid Cash xx Accounts Payable xx

FOB Shipping point; Freight No entry Freight-In xx

Collect Cash xx

FOB Destination point; Freight-Out xx No entry

Freight Prepaid Cash xx

FOB Destination point; Freight-Out xx Accounts Payable xx

Freight Collect Accounts Receivable xx Cash xx
Sales Returns and Allowances
Is an account used by the seller for the
merchandise returned by the customer due
to defects, wrong specifications or
adjustments allowed on the price.
It has a normal debit balance.
As a contra account, it is shown in the
income statement as a deduction from
gross.
Sales Discount
Is a cash discount granted by the seller to
the buyer for prompt payment or early
settlement of customer’s accounts.
It has a normal debit balance.
As a contra account, it will be shown in
the income statement as a deduction from
sales.