Lesson 7.
Ledgers
Fundamentals of Accountancy, Business,
and Management 1
Accountancy, Business, and Management
1
Do you want to know how
much of your funds went to
your education, food,
transportation, hobbies, etc.?
2
It is difficult to find
patterns in your
spending habits if you
only analyze the
transactions you make
in a day.
3
But if you examine your total
expenses in a month and
categorize them, you will
generate pieces of information
relevant to making conclusions.
4
Businesses also do not
stop with recording
daily transactions. They
organize these records
further to make the
preparation of financial
statements efficient.
5
Quick Look
Accountant in Action
Elisa is a newly hired accountant of Purple Corporation. One of her
responsibilities is to check and monitor each account balance. One of
the accounts maintained in the financial records of the company is
office supplies.
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Quick Look
Accountant in Action
One day, the owner of the company asked Elisa for the ending
balance of office supplies. The purpose of the owner is to prepare a
budget allocation for office supplies for next year's operations. The
owner provided Elisa with the general and special journals of the
company, where all daily transactions were recorded accurately.
7
Quick Look
Questions to Ponder
1. What information can Elisa find in the journal that is relevant to her
task?
2. What should Elisa do to monitor the running balance of office
supplies?
3. Do you think Elisa would be able to perform her task? Explain your
answer.
8
Learning
Competency
Illustrate the format of a general and subsidiary ledger
(ABM_FABM11- IIIf-24).
9
Learning Objectives
At the end of this lesson, you should be able to do the
following:
● Identify the parts of a general ledger.
● Illustrate the format of a general and subsidiary ledgers.
● Explain the importance of a general ledger in recording
business transactions.
10
How significant is the process of
posting in ledgers on
communicating accurate financial
information?
11
Ledgers
● Businesses undergo a systematic procedure of
organizing the journal entries, which are listed
chronologically, to reflect all the changes that happened
in an account within a particular accounting cycle.
12
Ledgers
Journals Financial Statement
records valid reports the financial
and relevant performance and position
transactions through major accounts
chronologically
1 2 3
Ledgers
Posts transactions “per
account” to show all
changes in an account
13
General Ledgers
Ledgers General Ledgers
Group of accounts contains all accounts
identified by their account needed to prepare financial
titles statements
14
General Ledgers
● book of final entry
○ final step in recording before the financial statement
is created
○ all transactions pertaining to a specific account are
recorded in one ledger
■ example: all cash received into a ledger for cash
15
Running Balance
Closer
Look
FABM Mall is one of the high-end malls in the National
Capital Region (NCR). They offer space for lease. Two
restaurants wanted to lease a space in this mall because
they knew that FABM Mall has a high foot traffic. Ilonggo
Resto and Bicol Resto accepted the lease offer from the
mall. The two restaurants are currently maintaining their
businesses in the said mall. Both restaurants receive
billing statements.
16
Running Balance
Closer
Look
The accountant of FABM Mall should monitor the
receivables from the two restaurants that lease a space.
Whenever a billing statement is issued or a payment is
received, the accountant writes the transaction in the
general journal. Afterwards, he/she transfers the records
to the accounts receivable subsidiary ledgers of Ilonggo
Resto and Bicol Resto. Through these documents, the
business will be able to have an accurate and timely
monitoring of the billings and payments.
17
Parts of a General Ledger
General Ledger Account
(Account) No.
Date Description Ref Debit Credit Balance
18
Parts of a General Ledger
General Ledger Account
(Account) No.
Date Description Ref Debit Credit Balance
Account No. – the unique account
number of each account title.
19
Parts of a General Ledger
General Ledger Account
(Account) No.
Date Description Ref Debit Credit Balance
Date – the date the business transaction
occurred.
20
Parts of a General Ledger
General Ledger Account
(Account) No.
Date Description Ref Debit Credit Balance
Description – it is the
description/explanation of the business
transaction.
21
Parts of a General Ledger
General Ledger Account
(Account) No.
Date Description Ref Debit Credit Balance
Ref – also known as reference. This
refers to the source documents where
the business transactions were initially
recorded
22
Parts of a General Ledger
General Ledger Account
(Account) No.
Date Description Ref Debit Credit Balance
Debit – amounts that were recorded as
a debit account.
Credit – amounts that were recorded as
a credit account.
23
Parts of a General Ledger
General Ledger Account
(Account) No.
Date Description Ref Debit Credit Balance
Balance – running balance after adding
or deducting the previous business
transaction.
24
Posting in the General Ledger
Suppose that Elisa was requested to present the balanceCloser Look
of the Cash Account. She examined the journal and found
three entries that affect the cash account. These are:
● March 2: Purchase of inventory - ₱25,000.00
● March 8: Received cash from customer - ₱2,500.00
● March 11: Paid the electricity bill received on March 1 -
₱5,000.00
The account number for the Cash Account is 1100, and the
beginning balance is ₱50,000.00.
25
Posting in the General Ledger
Closer
Look
The General Ledger for Cash Account will look like this:
Purple Corporation
General Ledger
Cash Account
(Partial - March 2022)
Acct no. 1100
Date Description Ref Debit Credit Balanc
e
01-03-22 Beginning Balance 50,000
02-03-22 Purchase of inventory 25,000 25,000
08-03-22 Received cash from customer 2,500 27,500
11-03-22 Payment of electricity bill (accounts 5,000 22,500
payable) 26
Check Your Progress
What are the similarities and differences between a
1 general journal and a general ledger?
Answer area
27
Subsidiary Ledgers
● show the breakdown of a specific general ledger
● example:
○ all business transactions pertaining to accounts
receivable is recorded in the “Accounts Receivable
general ledger”, showing the total amount
receivable by the company from all its customers
28
Subsidiary Ledgers
Types of
Subsidiary
Ledgers
Accounts Accounts
Receivable Payable
Subsidiary Subsidiary
Ledger Ledger
29
Accounts Receivable Subsidiary Ledger
Company Name
Sheet No.:
Accounts Receivable Subsidiary Ledger
Name of Company (Customer) Customer No.
Description Ref. Debit Credit Balance
Date
30
Accounts Receivable Subsidiary Ledger
Company Name
Sheet No.:
Accounts Receivable Subsidiary Ledger
Name of Company (Customer) Customer No.
Description Ref. Debit Credit Balance
Date
Customer Name – the name of the
customer from whom the company is
expected to receive the payment. 31
Accounts Receivable Subsidiary Ledger
Company Name
Sheet No.:
Accounts Receivable Subsidiary Ledger
Name of Company (Customer) Customer No.
Description Ref. Debit Credit Balance
Date
Customer No. – the unique account
number of the customer.
32
Accounts Receivable Subsidiary Ledger
Company Name
Sheet No.:
Accounts Receivable Subsidiary Ledger
Name of Company (Customer) Customer No.
Description Ref. Debit Credit Balance
Date
Date – the date the business transaction
occurred.
33
Accounts Receivable Subsidiary Ledger
Company Name
Sheet No.:
Accounts Receivable Subsidiary Ledger
Name of Company (Customer) Customer No.
Description Ref. Debit Credit Balance
Date
Description – the
description/explanation of the business
transaction. 34
Accounts Receivable Subsidiary Ledger
Company Name
Sheet No.:
Accounts Receivable Subsidiary Ledger
Name of Company (Customer) Customer No.
Description Ref. Debit Credit Balance
Date
Ref – also known as reference. This
refers to the source documents where
the business transactions were initially 35
Accounts Receivable Subsidiary Ledger
Company Name
Sheet No.:
Accounts Receivable Subsidiary Ledger
Name of Company (Customer) Customer No.
Description Ref. Debit Credit Balance
Date
Debit – amounts that were recorded as
a debit account.
Credit – amounts that were recorded as
a credit account. 36
Accounts Receivable Subsidiary Ledger
Company Name
Sheet No.:
Accounts Receivable Subsidiary Ledger
Name of Company (Customer) Customer No.
Description Ref. Debit Credit Balance
Date
Balance – running balance after adding
or deducting the previous business
37
transaction
Posting in the Accounts Receivable Subsidiary Ledger
Closer
Look
Suppose that Elisa also needed to report on the balances of
clients Mr. Reyes of Red, Inc. and Mr. Cruz of Blue, Inc. She
examined the previous ledger and found that the opening
balances of these clients are ₱8,000.00 and ₱5,500.00,
respectively.
38
Posting in the Accounts Receivable Subsidiary Ledger
Examining the journal, she found the following entries thatCloser Look
affect the accounts receivables:
● March 15: Mr. Reyes paid the company the amount of
₱2,000.00
● March 16: Mr. Cruz paid the company the amount of
₱1,500.00
● March 18: Sold goods on credit to Mr. Cruz for
₱6,000.00.
39
Posting in the Accounts Receivable Subsidiary Ledger
Closer
Look
The Accounts Receivable Subsidiary Ledger will look like
this:
Purple Corporation
Accounts Receivable Subsidiary Ledger
(Partial - March 2022)
Account: Red, Inc. (Mr. Reyes) Customer No. 32
Date Description Ref Debit Credit Balance
01-03-22 Opening Balance 8,000
15-03-22 Cash Receipts - Partial payment 2,000 6,000
Account: Blue, Inc. (Mr. Cruz) Customer No. 33
01-03-22 Opening Balance 5,500
16-03-22 Cash Receipts - Partial payment 1,500 4,000
18-03-22 Sales Journal - Sold goods 6,000 10,000 40
Accounts Payable Subsidiary LedgerSheet
Company Name
Accounts Payable Subsidiary Ledger No.:
Name of Company (Supplier) Supplier No.
Date Description Ref. Debit Credit Balance
41
Accounts Payable Subsidiary LedgerSheet
Company Name
Accounts Payable Subsidiary Ledger No.:
Name of Company (Supplier) Supplier No.
Date Description Ref. Debit Credit Balance
Supplier Name – the name of the
supplier where the company has the
obligation to pay from the business
transaction occurred. 42
Accounts Payable Subsidiary LedgerSheet
Company Name
Accounts Payable Subsidiary Ledger No.:
Name of Company (Supplier) Supplier No.
Date Description Ref. Debit Credit Balance
Supplier No. – the unique account
number of the supplier.
43
Accounts Payable Subsidiary LedgerSheet
Company Name
Accounts Payable Subsidiary Ledger No.:
Name of Company (Supplier) Supplier No.
Date Description Ref. Debit Credit Balance
Date – the date the business transaction
occurred.
44
Accounts Payable Subsidiary LedgerSheet
Company Name
Accounts Payable Subsidiary Ledger No.:
Name of Company (Supplier) Supplier No.
Date Description Ref. Debit Credit Balance
Ref – also known as reference. This refers
to the source documents where the
business transactions were initially 45
Accounts Payable Subsidiary LedgerSheet
Company Name
Accounts Payable Subsidiary Ledger No.:
Name of Company (Supplier) Supplier No.
Date Description Ref. Debit Credit Balance
Debit – amounts that were recorded as a
debit account.
Credit – amounts that were recorded as a
credit account. 46
Accounts Payable Subsidiary LedgerSheet
Company Name
Accounts Payable Subsidiary Ledger No.:
Name of Company (Supplier) Supplier No.
Date Description Ref. Debit Credit Balance
Balance – running balance after adding or
deducting the previous business
transaction 47
Posting in the Accounts Payable Subsidiary Ledger
Closer
Look
Suppose that Elisa also needs to report on the accounts
payable of the company to its suppliers. She examined the
journal and found the following transactions:
● March 21: Purchased paper from Papel, Inc. for
₱6,000.00 on credit.
● March 22: Purchased assorted supplies from Papel, Inc.
for ₱1,000.00 on credit.
● March 25: Paid Papel, Inc. an amount of ₱3,000.00
48
Posting in the Accounts Payable Subsidiary Ledger
Closer
Look
The Accounts Payable Subsidiary Ledger will look like this:
Purple Corporation
Accounts Payable Subsidiary Ledger
(Partial - March 2022)
Account: Papel, Inc. Supplier No. 5
Date Description Ref Debit Credit Balance
21-03-22 Purchase Journal - Purchased paper supplies 6,000 6,000
22-03-22 Purchase Journal - Purchased assorted 1,000 7,000
supplies
25-03-22 Cash Disbursement - Paid partial amount 3,000 4,000
49
Check Your Progress
What are the similarities and differences between the
2 formats of Accounts Receivable Subsidiary Ledger and
the Accounts Payable Subsidiary Ledger?
Answer area
50
Keep in Mind
● After recording business transactions in journals, the financial
information is further organized to reflect all the changes that
occurred in a single account within a specific accounting period.
This information is recorded in the ledgers.
51
Keep in Mind
● All transactions in the journals are transferred and organized in a
“per account” format using ledgers. A general ledger contains all
the accounts needed to prepare financial statements. Thus, it is
also considered as the book of final entry.
52
Keep in Mind
● Subsidiary ledgers show the breakdown of information posted in
the general ledger. The Accounts Receivable and Accounts
Payable subsidiary ledgers are the two most commonly used
types of subsidiary ledgers. The Accounts Receivable
subsidiary ledger is used to record and monitor receivables
from customers, while the Accounts Payable subsidiary
ledger is used to record and monitor payables to the suppliers.
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Keep in Mind
54
Try This
Identification. Identify the parts of the general ledger and
accounts receivable subsidiary ledger.
General Ledger
Account:Cash Account
No. 10000
1. 2.
3. 4. 5.
________ __________________ Ref
__________ __________ __________
__ __
55
Try This
Identification. Identify the parts of the general ledger and
accounts receivable subsidiary ledger.
Accounts Receivable Subsidiary Ledger
6. _______________________
7._____________________
Date 8. Ref 9. 10._______ Balance
__________________ _________ __
_
56
Practice Your Skills
Consider the following situation:
FABM Mall sends rental and utility bills to Ilonggo Resto and Bicol
Resto. They received the billing statements for November and
December. Part of the offer is that: if these two tenants start their
operations beyond the operating mall hours, they will be
penalized. One of the employees arrived late and opened the
business late. The mall sends another billing statement, which
includes the penalties for opening late.
FABM Mall received a billing statement from Meralco for their
electric consumption. They also purchased office supplies on
account to print billing statements.
57
Practice Your Skills
Which of the business transactions should be recorded in their
corresponding subsidiary ledger?
Accounts Receivable Subsidiary Accounts Payable Subsidiary
Ledger Ledger
58
Challenge Yourself
Answer the following questions:
Why is the General Ledger considered as the book of final
entry? Relate it to the functions of Journal and Financial
Statements.
Answer area
59
Challenge Yourself
Answer the following questions:
What are the consequences for a business if transactions
are not posted in the ledgers?
Answer area
60
Bibliography
Boyd, Ken, et al. Accounting for Dummies: All in One. NJ: John Wiley & Sons, Inc, 2014.
Gilbertson, Claudia and Mark Lehman. Century 21 Accounting. Ohio: South-Western Cengage Learning,
2008.
Wood, Frank and David Horner. Frank Wood’s Business Accounting Basics. Harlow: Pearson Education
Limited, 2010.
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