Module 3: The Journal
Estimated Time: 3 hours
Module Overview
This module converts the effects of transactions into debits and credits thereby signalling the start of
the formal recording process.
Lesson 1: The Journal
Learning Outcomes:
In this module, you will learn the following:
1. Definition of a journal
2. Columns of a journal
3. Preparation a journal
1. What is a journal?
A journal (also known as the book of original entry) is a book of accounts where financial
transactions are initially recorded. The recording of transactions are done chronologically
(arranged according to date).
2. What are the five main columns of a journal?
The five main column of a journal are (1) date, (2) account title and explanation; (3) F or posting
reference; (4) debit column and (5) credit column
3. How does a journal look like?
Date Account title and explanation F Debit Credit
4. What is the difference between a journal and journalizing?
A journal is the book where the entries are recorded while journalizing is the process of
recording entries in the journal.
Lesson 2: The Journal Entry
Learning Outcomes:
In this module, you will learn the following:
1. Define a journal entry
2. Prepare a simple journal entry
3. Prepare a compound journal entry
Notes
1. What is a journal entry?
A journal entry shows the effects of a business transaction in terms of debits and credits. The
journal entry is recorded in the journal.
2. What are the two kinds of journal entries?
The two kinds of journal entries are the simple entry and the compound entry.
A simple entry consists only of two accounts, one account is debited and another account is
credited.
A compound entry happens when more than two transactions are merged in one journal entry,
resulting to a minimum of three or more accounts in one single entry.
3. Give an example of a simple journal entry.
The owner invested cash of P10,000 to the business.
Entry is:
Cash 10,000
Cruz Capital 10,000
To record owner’s investment
4. Give an example of a compound entry.
The owner invested cash of P10,000 and equipment value at P15,000 to the business.
Entry is
Cash 10,000
Equipment 15,000
Cruz Capital 25,000
To record owner’s investment.
5. How do we know if an entry is a debit entry or a credit entry?
A debit entry is recorded on the left side of the journal while a credit entry is indented a few
inches to the right side of the journal.
6. What is considered as a complete journal entry?
A complete journal entry includes a debit entry, a credit entry, and a short explanation on the
nature of the transaction
Lesson 3: Record the Journal Entry to the Journal
Learning Outcomes:
In this module, you will learn the following:
1. Rules in recording entries to the journal
2. Record the journal entry to the journal
1. What are the rules in filling out the date column in the journal?
a. The year is written in small fonts, only once in the journal unless the year changed.
b. The month is written only once in a page (unless the month has changed) and is written
again when a new page is used.
c. The date is written for every transaction recorded.
Example:
Date Account Titles and Explanation F Debit Credit
2020
April 1 Cash 10,000
Cruz, Capital 10,000
To record owner’s investment.
1 Supplies 6,000
Accounts payable 6,000
Bought supplies on account.
2. What are the rules in filling out the account titles and explanation column in the journal?
a. The journal entry is recorded with the debit entry on the left side of the column, the credit
entry is indented and the explanation is further indented.
b. Leave a space between each entry to visually separate the transactions.
TIP: Some students find it difficult to paraphrase an explanation of the transaction. To counter this
difficulty, students may just copy the transaction and write it in full under the explanation space.
3. How is a compound entry recorded under the account titles and explanation column of the
journal?
The entry to record a compound transaction is illustrated below:
Date Account Titles and Explanation F Debit Credit
2020
April 1 Cash 10,000
Equipment 15,000
Cruz, Capital 25,000
To record owner’s investment.
1 Supplies 6,000
Accounts payable 6,000
Bought supplies on account.
4. What are the rules in filling out Folio or Posting Reference (PR) column in the journal?
The folio or PR column is filled out only during the posting process. The procedure will be
discussed in the next module.
5. What are the rules in filling out the debit and credit columns in the journal?
The debit and credit amounts of the transaction are recorded in their respective debit and credit
columns. Normally, a peso sign (P) is indicated only once on the first debit and credit amounts to
indicate the currency in use.
Observe that the lines in the debit and credit columns of the journal are called as money
columns. These lines separate the centavos from the ones, tens, hundreds, thousands, etc.
There is no need to use a dot and a comma sign to separate the centavos and thousands.