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Accountancy,
Business, and
Management 2
2nd Quarter: Module 1
Accounting Books - Journal and Ledger

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Content Standards:
The learners demonstrate an understanding of debit and credit, journal entries to
record basic business transaction and using t-accounts, and posting to general
ledger.
Performance Standards:
The learners shall be able to prepare journal entries for basic business
transactions; solve exercises and problems that require using the t-account.

Learning Competency:
The learners shall be able to:
1. Differentiate the journal from the general ledger (ABM_FABM12-IIa-b-1)
2. Determine the normal balance of an account (ABM_FABM12-IIa-b-2)
3. Prepare journal entries to record basic business transaction (ABM_FABM12-IIa-
b-3)
4. Determine balances of accounts using the t-account. (ABM_FABM12-IIab-4)

Specific Learning Outcomes

At the end of this lesson, the learners will be able to:
1. Learn the use of journal and general ledger.
2. Prepare journal entries to record business transactions
3. Post the transaction in the general ledger
4. Determine the normal balances of the accounts using the t-account

To the Learners
This self-learning module is designed to engage you to learn independently at
the expected time frame. Follow carefully all the contents and instructions
indicated in every section of this module. Your teacher will help you should you
have any queries and will check all your activities and outputs. You can write
your answer in a separate worksheet or notebook.

What I need to Know

1. Introduce the following learning objectives:

a. differentiate the journal from the general ledger.
b. determine the normal balance of an account.
c. prepare journal entries to record basic business transaction
d. determine balances of accounts using the t-account.

2. Review the discussion on the journal and general ledger.

Ask the learners what is a journal and why it is called the book of original entry.
Ask the learners what is a general ledger and why it is called as the book of final
entry. Ask the learners if they maintain a diary.

What I Know

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Direction: Read each sentence carefully and determine the best answer. Write
the letter in the space provided before the number.

________1. Which is known as book of accounts?

A. Sales journal C. Special journal
B. Journal D. Ledger
________2. What is used to record transactions in the book of original entry?
A. Ledger C. General journal
B. Journalizing D. Bookkeeping
________3. Which is a representation of a general ledger account?
A. T-account C. special ledger
B. Accounting equation D. Posting
4. What is used to record all cash that had been received?
A . Cash disbursement journal C. Sales journal
C. Purchase journal D. Cash receipts journal
________5. Where are balances reported on financial statements taken from?
A. the general journal balances. C. ledger balances
B. Trial balance D. Adjusted trial balance
________ 6. Which is used to record special and infrequent transactions?
A. Special journals C. Sales journal
B. Purchase journal D. Cash receipts journal
________7. What is a means of accumulating in one place all the information
about changes in an asset, liability, equity, income, and expense
accounts?
A. Ledger C. Special ledger
B. Posting D. Journalizing
________8. Where does purchases of merchandise made on account recorded?
A. Cash journal C. Sales journal
B. Receivables journal D. Purchase journal
________9. Where does depreciation expense recorded?
A. Special journal C. General journal
B. Cash disbursement journal D. Purchase journal
________10. What is an example of a contra asset account?
A. Accumulated depreciation C. Depreciation
B. Accounts receivable D. Drawing account

What’s In

Modified Matching Type: Classify the transactions below in the box of debit and credit.

Debit Credit

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1. Purchased an office supplies worth P5 000.
2. Paid the utility bills worth P3000.
3. Mr. Lee invested P100 000 for his laundry business.
4. Collected P10 000 from the customers.
5. Received P3000 from the service rendered.

What’s New
Direction: Classify the transactions below to the appropriate journal where it will be recorded.

Sale Journal Purchases Cash Receipts Cash General

Journal Journal Disbursement Journal
Journal

Cash sales Payment of utilities Purchases made on account

Depreciation expense Interest income received Collection from receivable
Interest expense paid Accrual of unpaid salaries Deliveries made to customer on account
Cash drawings of owners Amortization expense Payment for merchandise purchased on account
Accrual of unpaid bills Cash contribution from owners Payment for acquisition of equipment
Principal payment for bank loans

What is it

1. The General Journal and Special Journal

Many businesses maintain several types of journals. The nature of the business
operations and the volume of transactions determine the type and number of
journals needed. The simplest type of journal is called the general journal. The
process of recording a transaction is called journalizing the transactions. This
type of journal is unique among journals because it may be used to record any
type of business transactions. Recording all transactions in the general journal is
not cost effective and time consuming. To speed up and simplify the recording
process, most businesses make use of special journals. Each special journal is
designed to record a particular type of transaction efficiently and quickly.
Examples of special journals and their use are the following:
a. Cash Receipts Journal – is used to record all cash that had been received.
b. Cash Disbursements Journal – is used to record all transactions involving cash
payments.
c. Sales Journal (Sales on Account Journal) – is used to record all sales on credit
(on account)

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D. Purchase Journal (Purchase on Account Journal) – is used to record all
purchases of inventory on credit (or on account)
2. The importance of using a journal
• The journal shows all information concerning a particular transaction.
• The journal provides a chronological record of all the financial events in the
business over time. If we want to know about a certain transactions of years or
months back, we can trace the said transactions as long as we have the date of
the said transaction. The entries in the journal are arranged by date that makes
it necessary to locate a particular event.
3. The Use of General Ledger
A ledger is a means of accumulating in one place all the information about
changes in an asset, liability, equity, income, and expense accounts. A sample of
the general ledger is shown below:

Recall the sample chart of accounts shown in ABM1 Chapter 8 (Types of Major Accounts). A T-Account for each
of the account titles listed on the said chart is prepared to determine the balance at the end of the period of each
account.
4. Determining the Balance of a T-Account. Shown below is the Chart of Accounts discussed in ABM1 (Types of
Major Accounts):

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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 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. The normal
balances of these accounts are listed below:
a. Asset Accounts – Debit Balance; however the normal balance of a contra asset
account is credit.
In the above chart, the contra asset accounts are:
Allowance for Bad Debts,
Accumulated Depreciation (Accum. Deprn.) – Store Equipment
Accum. Deprn. – Off Eqpt
Accum. Deprn – Trans Eqpt
Accum. Deprn – Building
b. Liability Accounts – Credit Balance
c. Equity Accounts – Owner’s, Capital account has a normal balance on the credit
side while the Owner’s, Withdrawal account has a normal balance on the debit
side.
d. Income – Credit Balance
e. Expense – Debit Balance

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A summary of the normal balance of the account is shown below:

When an account that normally has a credit balance actually has a debit balance, it may mean that an error have
occurred or that an unusual situation may exist. For example the accounts receivable account normally have 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. To illustrate the determination
of balances in the T-Account, let us take the following series of transaction for the month of February 2016:
On February 1, 2016, the following beginning balances were correctly determined from previous accounting
period of Vicente Repair Shop:

Transactions during February 2016 are:

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After posting to the ledger or to the T-account, the trial balance for the above transactions is:

The entries prepared above involves one debit and one credit account, however there are instances wherein
more than one account are debited or credited. These are called compound journal entries.
Compound Journal Entry: An entry the involved two accounts only, one debit and one credit is called a simple
journal entry. Some transactions, however, require more than two accounts in journalizing. An entry that requires
three or more accounts is a compound entry.
To illustrate:
Ariel Garden Supply Store acquire a land for P800,000. Ariel paid P300,000 cash and issued a promissory note
for the balance.
Land P800,000
Cash P300,000
Notes payable 500,000

What’s More

On April 1, 2016, Nels Ferrer organized a business called Friendly Trucking. During April, the company entered
into the following transactions:

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Instructions:
a. Journalize the above transactions
b. Post to ledger
c. Prepare the trial balance, as of April 30, 2016

What I have learned.

Dayana Company had the following transactions during December:

a. Sold merchandise on credit for Php5,000, terms 3/10, n/30. The items sold had
a cost of Php3,500.
b. Purchased merchandise for cash, Php720.
c. Purchased merchandise on credit for Php2,600, terms 1/20, n/30.
d. Issued a credit memorandum for Php300 to a customer who returned
merchandise purchased November 29. The returned items had a cost of Php210.
e. Received payment for merchandise sold December 1.
f. Received a credit memorandum for the return of faulty merchandise purchased
on December 4 for Php600.
g. Paid freight charges of Php200 for merchandise ordered last month. (FOB
shipping point).
h. Paid for the merchandise purchased December 4 less the portion that was
returned.
i. Sold merchandise on credit for Php7,000, terms 2/10, n/30. The items had a
cost of Php4,900.
j. Received payment for merchandise sold on December 24.
Required: Prepare the general journal entries to record these transactions using
a perpetual inventory system.

What I can Do

Directions: State whether the following T-accounts have normal balance or not.

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 Assessment

Prepare the journal entry to record the following independent transactions:

1. Siopao Queen paid its P1,390 electric bill for the month.
2. Friendly Store sold for cash, P4,5000 worth of merchandise. The cost of goods sold is P2,300. The company
uses perpetual inventory system.
3. Waldo Merchandising purchased on account P23,000 goods for resale from Melody Inc. The company uses
periodic inventory system.
4. Butch Auto Repair purchased a building for his business at a cost of P500,000. Butch paid P300,000 and for
the balance he issued a promissory note payable 60 days after.
5. Seth Laundry Company paid advertising contract for one month, P2,000.

Additional Activity

Do the posting and trial balance of the above journal entries.

REFERENCES
The Commission on Higher Educationin collaboration with the Philippine Normal University Teaching Guide for
Senior High School

FUNDAMENTALS OFACCOUNTANCY, BUSINESS, AND MANAGEMENT 2 BY: Dani Rose C. Salazar

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