SHS

Fundamentals of Accountancy,
Business and Management 1
Module 5

1
Fundamentals of Accountancy, Business and Management 1
Module 5
First Edition, 2021

Copyright © 2021
La Union Schools Division
Region I

All rights reserved. No part of this module may be reproduced in any

form without written permission from the copyright owners.

Development Team of the Module

Author: Jimena Veronica T. Nieva, MT I

Editor: SDO La Union, Learning Resource Quality Assurance Team

Illustrator: Ernesto F. Ramos Jr., P II

Management Team:

Atty. Donato D. Balderas, Jr.

Schools Division Superintendent

Vivian Luz S. Pagatpatan, Ph.D

Assistant Schools Division Superintendent

German E. Flora, Ph.D, CID Chief

Virgilio C. Boado, Ph.D, EPS in Charge of LRMS

Lorna O. Gaspar, EPS in Charge of FABM

Michael Jason D. Morales, PDO II

Claire P. Toluyen, Librarian II

2
 Target

ILLUSTRATE THE FORMAT OF A GENERAL AND SPECIAL JOURNALS

General Journals and Special Journals

The learner shall be able to illustrate the use of a general journal and special
journal and identify the types of special journals. Businesses need to keep a diary
of daily business activities or events for them to keep track of the on-going
activities of the business. Accountants call journals the “book of original entry”
because no transactions can be further recorded without being entered into the
journal first. Learners will be equipped with knowledge and understanding where to
record transactions; the journal or special journals.

MELC: Illustrate the format of a General Journal and Special Journal

(ABM_FABM11-IIIf-23)

After going through this information sheet, you are expected to :

1. explain the use of general and special journals to record business

transactions
(ABM_FABM11-IIIf-23)

MELC: Illustrate the format of a general Ledger and Subsidiary Ledger

(ABM_FABM11-IIIf-24)

After going through this information sheet, you are expected to :

1. discuss the use of general and subsidiary ledgers to record business
(ABM_FABM11-IIIf-24)

3
 Jumpstart

Transaction Journals and Special Journals

Transactions and events are the starting points in the accounting process.
By relying on business forms, transactions and events can be analyzed as to how
they will affect business performance and financial status. Journals and special
journals used in recording financial transactions help Bookkeepers and
Accountants to identify and describe transactions and events entering the
accounting process. These original written evidences contain information about the
nature and the amounts of the transactions. Indeed, these are the bases for journal
entries.

Activity 1: Motivation! Question:

1. What is your definition of accounting?

2. From the definition, where do we record the transactions that we

have identified? What are the tools that we use to document these
transactions?

Discover
Some of the common source documents are the following:

Journal. This is a chronological record of the entity’s transactions. A journal entry

shows all the effects of a business transaction in terms of debits and credits. Each
transaction is initially recorded in a journal rather than directly in the ledger. A
journal is called the book of original entry. The nature and volume of transactions of
the business determine the number and type of journals needed. The general
journal is the simplest journal.

The journal makes several significant contributions to the recording process:

• It discloses in one place the complete effects of a transaction

• It provides a chronological record of transactions.

• It helps to prevent or locate errors because the debit and credit amounts for each
entry can be easily compared.

Journalizing process

A complete entry consists of:

4
• The date of the transaction which is entered in the Date column.
• The debit account title (that is, the account to be debited) which is entered first at
the extreme left margin of the column headed “Account Titles and Explanation,”
and the amount of the debit is recorded in the Debit column.
• The credit account title (that is, the account to be credited) which is indented and
entered on the next line in the column headed “Account Titles and Explanation,”
and the amount of the credit is recorded in the Credit column.
• A brief explanation of the transaction which appears on the line below the credit
account title. A space is left between journal entries. The blank space separates
individual journal entries and makes the entire journal easier to read.
• The column titled Ref. (which stands for Reference which is left blank when the
journal entry is made. This
column is used later when the journal entries are transferred to the ledger
accounts.

To illustrate the recording of transactions in the general journal, let us use the
following transactions as an example:

• June 1, 2019 Mr. Jack Ibagbaga invested PHP300,000 in a Laundry business

• June 7, 2019 purchased Laundry Equipment for his business amounting to
PHP85,000 in cash
• June 10, 2019 started his operations and recorded a sale for that day amounting
to PHP35,000.

Account Titles and Posting

Date Debit Credit
Explanation Reference

June 1 Cash 101 300,000.00

Jack Ibagbaga Capital 601 300,000.00
To rcord J. Ibagbaga Capital
June 7 Laundry Equipment 205 85,000.00
Cash 101 85,000.00
To record purchase of equipment
June 10 Cash 101 35,000.00
Sales Income 100 35,000.00
To record sales income

Table 1. General Journal

5
 Other common source documents are the following special journals;
Cash Receipt Journal. This is a book of original entry where all cash receipt
transactions are recorded such as cash investment, loans, cash sales, collections of
customers’ accounts and cash refund.

Account Sundry
Sales Cash
s Accou
Receive Explanati OR Cash Discou Sales
Date F Receiva nt D
d from on # Debit nt Cred F Cr
ble Title r
Debit it
Credit

Ja Dan investmen on Pasco, 30 50,00

file
n 1 Pasco t 50,000 Capital 1 0
Loans
on
90 day, 50,000 Payabl 20 50,00
file
2 PNB 18% note . e 2 0

Custome CR
8,00
rs T
6 cash sales 8,000 0.
Lopez partial 00
8 Trdg collection 1 5,000 5,000
1 Chavez 00
0 Store full collect 2 4,410 90 4,500
117,,41
90.00 9500 8,000 100,00
0. . 0.

Table 2. Cash Receipt Journal

Cash Payment/disbursement Journal. All cash payments are recorded in this

journal such as cash purchases of merchandise and other assets, payments of
accounts and other liabilities, payments of expenses, cash withdrawals of the
owner and cash refunds to customers.

Vo Purchas Sundry
Cash
. Cash e Accounts
Date Paid to Explanation Purchas Accoun
N Credit Discoun Payable D
o. t Credit es Debit F Cr
t Title r

F Dr

8 down 1 2,000.0 2,000.0

Jan Rex Trdg payment 0 0

10 cash 2 2,500.0
Sphere purchases 0

Pasco, 3
11 cash 3 Drawin 0
Pasco withdrawal 500.00 8,000.00 g 1 500.00

15 Mon 4 8,910.0 9,000.0

Trdg full payment 0 90.00 0
2
20 Margie 5 1,000.0 SRA 0
Tan cash refund 0 2 1,000.00

14,910. 11,000.
00 90.00 00 8,000.00 1,500.00

Table 3. Cash Payment/Disbursement Journal

6
Sales Journal. Sales of merchandise are usually either on cash or on account
basis. Cash sales, for retailers like the big department stores, are rung on cash
register tapes which are summarized in a cash summary report and entered in the
sales journal based on the total amount.

Invoice Accounts Cash Sales

Date Customer F Sales Credit
No. Receivable Debit Debit

Union
Oct 2 Store 101 5,000.00 5,000.00

Lopez
4 Trdg 102 7,500.00 7,500.00

Chavez
5 Store 103 4,500.00 4,500.00

Cash
6 Sales CRT 8,000.00 8,000.00

17,000.00 8,000.00 25,000.00

Table 4. Sales Journal

Purchase Journal. Purchases of merchandise are usually on cash or on account.

These are supported by invoices given by the suppliers. Any cash payment is
supported by a cash voucher.

Purchase Purchases Accounts Cash

Date Invoice No. F
from Debit Payable Purchases
Credit Credit

Oct 5 Mon Trdg 120 9,000.00 9,000.00

8 Rex Trdg 54 5,000.00 5,000.00

Sphere
10 Trdg 8 2,500.00 2,500.00

16,500.00 14,000.00 2,500.00

Table 5. Purchase Journal

7
 The summary of business papers evolving finances of the business which are
used for recording and journalizing transactions.

Summary of Special Journals

Journal Specific Transactions Recorded Posting Abbreviation

Cash Receipts
Journal Receipts of cash CR
Cash Payments
Journal Payments of cash CP
Sales Journal Sales of merchandise on account S
Credit purchases of merchandise
Purchase Journal and other items P
Entries that do not fit with the other
General Journal journals GJ
Table 6. Summary of Special Reports

Explore
Direction: Indicate the type of source document that is likely to contain the
details of each transaction.

Several transactions of Hanson Pool Service are described below:

1. Purchased P500 worth of chemicals on account from Campbell

Chemical Company.
2. Received cash from a customer on account, P120.
3. Purchased a new generator for use in the business, paying P55,000 cash.
4. Paid the current month's electric bill of P95.
5. Billed customers for pool services performed during the past week,
P2,300.
6. Invested a used truck in the business; the truck is valued at P300,000.
7. Made a P2500 payment on account to Campbell Chemical Company.

8
 Deepen

Activity 1: Transaction Analysis

You own and operate a business that sells goods to other businesses. You allow
established customers to buy goods from you on account, meaning you let them
charge purchases and offer terms of 2/10, n/30. Record the following
transactions in the sales journal and cash receipts journal:

July 1 Sales on credit to DJ Vera Co. amounting to Php7,200.00, Invoice #123

July 9 Sales on credit to J. Tonesa Inc., amounting to Php5,200, Invoice # 124
2/10; n/30
July 16 Receive Php7,200 from DJ Vera Co. (did not receive during the discount
period)
July 17 Sales on credit to A. Caoile amounting to Php3,780, Invoice 125
July 18 Received the whole amount from J. Tonesa within the discount period

Direction: Multiple Choice. Choose the best answer and write your answers
in a separate sheet of paper.

1. What is to be recorded in a purchase book?

A. All cash purchases B. All Credit purchases
C. All collections D. All purchases

2. All Collections from debtors are to be recorded in what book?

A. Cash Receipt Journal B. General Journal
C. Purchase Journal D. Sales Journal
3. Those transactions for which there is no separate book are recorded in the?
A. Cash Receipt Journal B. General Journal
C. Purchase Journal D. Sales Journal

9
4. The Person from whom the goods are purchased on credit are called:
A. Creditor B. Debtor
C. Purchaser D. Seller

5. Which of the following statements is false with regard to a Cash Receipts

Journal?
A. All receipts of cash from customers are recorded in it
B. Receipts of cash from the owner should NOT be recorded in it
C. Receipt of cash from cash sales should be recorded in it
D. Receipts of cash from borrowings should be recorded in it

6. When special journals are used, Do you still require a general journal?
A. Not needed B. Still required
C. Used only to record purchases D. Used only to record sales

7. Supplies were purchased on credit and the entry was recorded in the
Purchases Journal. When you return some of these supplies to the vendor,
What will be the journal entry for this return to be recorded in the general
journal?
A. Debit cash and credit supplies
B. Debit supplies and credit cash
C. Debit accounts payable and credit supplies
D. Debit supplies and credit accounts payable

8. The general journal is the book of entries?

A. First B. Generic
C. Original D. Secondary
9. How many times recording of transaction is to be done?
A. At the end of the accounting period
B. Frequently during the accounting period
C. Once a year only
D. Semi annual only
10. What do you call the process of recording transactions to the different
journals?
A. Adjusting B. Entry Writing
C. Journalizing D. Posting

10
 Target

ILLUSTRATE THE FORMAT OF A GENERAL AND SUBSIDIARY LEDGER

General Ledger and Subsidiary Ledger

The learner shall be able to understand and illustrate the use of a general and
subsidiary ledger. They will be able to learn how to collect historical transaction
data from the book of the original entry called journal and enter such entries to
the book of final entry called ledger. Learners will be equipped with knowledge
necessary to classify such transactions and organizing entries by account.

Jumpstart

The ledger provides the transaction history and current account balances
throughout the accounting period. It serves as the reliable source of information or
data at the end of the accounting period that serves as a basis in making the
company’s activity for the period in the firm's Revenue and Expense Accounts.

• The Balance sheet summarizes the current balances of Assets, Liabilities,

and Equities accounts of the company, at the end of accounting period.
▪
• The Income statement summarizes the company’s revenue and expense
account

Explanations below define, explain and illustrate ledger in context with concepts,
emphasizing the following:

▪ First, the ledger's role in the accounting cycle, the nature of posting, and
practices in "continuous accounting."
• Second, how firms record and organize transactions of various kinds
through the Journal, Sub-Ledger, and General Ledger.
▪ Third, Ledger structure and contents, including the T-account Structure

11
Direction: Write TRUE if the sentence is CORRECT and FALSE if INCORRECT.
Use a separate sheet of paper for your answers.

1. The ledger is sometimes called a T-Account

2. Posting is the process of transferring information from the journal to the
Ledger
3. Their are at least two accounts in a journal entry.
4. The Journal is sometimes call the book of original entry.
5. A correcting enty is required when in the process of posting you
discovered an error.
6. In posting a transaction, you need to have the column for the date of
the transaction (Year, Month, Day)
7. If the transaction is journalized on the 10th but not posted until the
12th, the date of the posting should be the 12th.
8. An account with a Zero balance is no longer necessary to be listed it in
the Trial Balance.
9. Ideally recording of transactions should be on a daily basis; however,
businesses having few transactions may record only once a week.
10. Subsidiary ledger is where you record individual customer account.

Discover

The Ledger and Subsidiary Ledger

The ledger refers to the accounting book in which the accounts and their
related amounts as recorded in the journal are posted periodically. The ledger is
also called the ‘book of final entry’ because all the balances in the ledger are
used in the preparation of financial statements. This is also referred to as the T-
Account because the basic form of a ledger is like the letter ‘T.
Posting is the process of transferring information from the journal to the
ledger.

Ledger Role in the accounting cycle

In the accounting cycle, the ledger is considered as its centrepiece. The
accounting system and the company’s financial statement reports consist of
account balances and transaction histories. Ledger is involve in several steps in
the accounting cycle.

12
The age of continuous accounting
Historically, the use of journal and ledger entries are handwritten in
notebooks after every transaction or event such as sale, expense, earned revenues
and any other activities that affects/impacts the company’s operation occur.
Today, journals and ledgers data and transactions are recorded in the company’s
books through the use electronic accounting software e.g. Peachtree, Point of sales
system software. Continuous Accounting is the practice of keeping accounting
system or records up to date and ready for closing at any point in the accounting
period.

Two types of ledgers

There are two kinds of ledgers, namely; the general ledger and the subsidiary
ledgers.

1. General Ledger
A grouping of the entity’s accounts is referred to as ledger. Although some
firms may use various ledgers to accumulate certain detailed information, all firms
have a general ledger. It is called the “reference book” of the accounting system
and is used to classify and summarize transactions, and to prepare data for basic
financial statements.

The Chart of Accounts present all the listings of account entries that
appears in the company’s journal and ledger accounts. All active account in the
list are to be presented in the general ledger.

Account: Cash Account No. 110

Journal
Date Explanation Debit Credit Balance
Reference

2019
1-
Jan J-1 250,000 250,000

Table 1. General Ledger

2. Subsidiary Ledger.
This is considered an individual customer’s account (in case of Accounts
Receivable Controlling Account). The individual customer accounts are the
subsidiary account. The subsidiary ledger, like the general ledger, may simply be a
group of accounts in a binder, or it may be a file card arrangement. In either case,
the order is either numerical by customer number or alphabetical by customer
name. The sum of all the individual balances in the subsidiary ledger must equal
the balance in the control account in the general ledger. For every amount posted

13
to the general ledger controlling account, must be posted to one or more of the
customers’ accounts in the subsidiary ledger.
Name: A. Gray
Address: 1234 Wilson St. San Juan

Date Terms F Debit Credit Balance

Jan
24 SA No. 01 J2 16,000.00 16,000.00
30 OR No. 81 J2 8,000.00 8,000.00

Table 2. Subsidiary Ledger

Two Main Subsidiary Ledgers that are used in double entry bookkeeping

1. Accounts Receivable ledger-

The accounts receivable ledger or customers ledger lists all customers

who has an obligation to pay to the company along with their current
balances. In other words, the Accounts Receivable ledger is a summary of
all current and outstanding accounts receivable at the end of a period.

2. Accounts Payable ledger-

An accounts payable subsidiary ledger is an accounting ledger that shows

how much the company owe to its suppliers’ vendors and other financial
institutions. It also shows the company’s current or outstanding balance.
The subsidiary ledger records all of the accounts payables that a company
owes.

T- Account

A ledger is often referred to as the T-Account because it is often

represented by letter T. T Account is the visual structure used in double entry
bookkeeping that separates the debits and credits. Usually, debits are listed to
the left side of the T Account while credits are listed on the right side of the T -
Account.

14
To Illustrate:

Account Title
DEBIT CREDIT
Assets Liabilities
Expenses Income
[Link] Liabilities Capital
Inc. in Assets Inc. in Liabilities
Losses Dec. In Assets

Normal Balances of the elements in the accounting equation

ASSETS = LIABILITIES + OWNERS' EQUITY

DEBIT CREDIT CREDIT

15