Fundamentals of Accountancy, Business & Mgt. 1- Lesson 1

Account Titles and Description

1. BOOKS OF ACCOUNTS Team Almazor

2. The Bureau of Internal Revenues, the taxing in the Philippines, mandates that all business or persons, required by law, to pay internal revenue taxes shall keep permanently-bound books of accounts for registration or stamping.

3. Books of accounts Books of accounts are records in which all accounts and transactions of a business are maintained on a regular basis.

4. Journal A journal functions as a financial diary . It is used to record chronologically all transactions of a business as they occur. Since it provides the first evidence of a formally-recorded transaction, it is commonly referred to as the book of original entry.

5. The use of a journal provides the following advantages: it provides a systematic and chronological record of transactions; it simplifies the ledger as some details in the journal need not be written in the ledge;

6. it provides adequate explanation of each entry and presents necessary information about the transactions such as the account debited and credited and related amounts; it ensures that the double-entry bookkeeping system is observed when recording transactions; and

7. it helps in solving misunderstanding in business because it serves as proof and legal evidence of transactions. There are two types of journals: (1) the special journal: and (2) the general journal

8. Special journals Special journals are journals used to record recurring transactions. There are four common types of special journals, namely: (1) sales journal; (2) purchases journa1; (3) cash receipts journal; and (4) cash disbursements journal.

9. Sales journal The sales journal (SJ) is a journal used to record sale of merchandise on account. This typically used by merchandising business which have many credit sales transactions.

10. The SJ typically includes the following information: the title “Sales Journal”; page number; date of the transaction; invoice number; name of the customer; reference number for posting purposes; a special money column for Accounts Receivable debit/Sales credit.

11. Different businesses might have different formats and columns. A sample format of SJ is shown below: SALES JOURNAL Date Invoice No. Customer Name Ref Dr : Accounts Receivable Cr: Sales

12. purchase journal The purchases journal (PI) is a journal used to record purchase of merchandise on account. This is typically used by merchandising businesses which have many credit purchases.

13. The PJ typically includes the following information: (a) the title “Purchases Journal”; (b) page number; (c) date of the transaction; (d) name of the supplier; (e) reference number for posting purposes; (f) a special money column for Purchases debit/Accounts Payable credit.

14. A sample format of a PJ is shown below: PURCHASE JOURNAL Date Supplier Name Ref Dr : Purchases Cr: Accounts Payable

15. The cash receipts journal (CRJ) is a journal used to record receipts of cash from whatever source. All business transactions which include a debit to Cash are recorded in this journal. Cash receipt journal

16. The CRJ typically includes the following information: (a) the title “Cash Receipts Journal”; (b) page number; (c) date of the transaction; (d) official receipt number; (e) name of the party from whom cash is received;

17. (f) reference number for posting purposes; (g) a special money column for Cash debit; (h) a special money column for Sales Discount debit; ( i ) a special money column for Accounts Receivable debit and credit;

18. (j) a special money column for Sales credit; and (k) a special money column for Other Accounts credit.

19. A sample format of a CRJ is shown below: CASH RECEIPT JOURNAL Date Official Receipt No. Received from Ref. Cash Dr Sales Discount Dr Accounts Receivable Dr (Cr) Sales Cr Other Accounts Cr

20. The cash disbursements journal (CDJ), or sometimes known as the cash payments journal (CPJ), is a journal used to record payments of cash for whatever purpose. All business transactions which include a credit to Cash are recorded in this journal. Cash disbursements journal

21. The CDJ typically includes the following information: the title “Cash Disbursements Journal”; page number; date of the transaction; check voucher number or reference number of other source documents;

22. (e) name of the party to whom cash is paid; (f) reference number for posting purposes; (g) a special money column for Cash credit; (h) a special money column for Purchases debit; ( i ) a special money column for Accounts Payable debit and credit;

23. (j) a special money column for Purchase Discount credit; and (k) a special money column for Other Accounts debit.

24. A sample format of a CDJ is shown below: CASH DISBURSEMENTS JOURNAL Date Check Voucher No. Paid to Ref. Accounts Payable ( Dr ) Cr Purchases Dr Other Accounts Dr Purchase Discount Cr Cash Cr

25. The general journal (GD) which looks like a two-column columnar notebook, is the journal used to record all other business transactions not recorded in the special journals. General journals

26. The GJ includes the following information: the title “General Journal”; Page number; Date of transaction; Particulars column; Reference column; Debit money column; and Credit money column

27. General Journal Date Particulars Ref Dr Cr

28. The particulars column is used to record the journal entry itself which includes the account/s debited, the account/s credited, and the explanation for the journal entry. The reference column is use for posting purposes.

29. Special journals vs general journal

30. The use of special journals, in addition to the general journal, provides the following advantages: (1) it promotes division of labor, (2) it saves time journalizing transaction; (3) saves time in posting transactions, and it aids in decision making.

31. ledger A ledger is a collective record of individual accounts used by a business. It is used to sort all entries made in the journal in chronological order and to group all transactions that affect individual accounts in order to facilitate the preparation of financial statements.

32. The use of a ledger has the following advantages: it provides detailed information about revenues and expenses in one place, hence results of business operations can be easily determined; it provides detailed information about assets, liabilities, and owner’s equity of the business, thus the financial position of the business can easily be known;

33. it assists management in monitoring business performance through information in individual ledger accounts; and it serves as tool for auditors to track the flow of business transactions for a given period of time.

34. The general ledger is used to accumulate and classify individual transactions from the journal. It divides the account into two sides: the left side and the right side. Debit information is listed on the left side, while credit information is listed on the right side. General ledger

35. A typical general ledge; includes the following information: account title; account number; date of the transaction; items column; reference column; debit money column; and (g) credit money column.

36. A sample general ledger is presented below: ACCOUNT TITLE Date Items Ref. Dr Date Items Ref Cr

37. The subsidiary Iedger is used to provide detailed information about a specific ledger account. This means that just by looking at the subsidiary ledger, the business know at a glance how much it owes others and how much other owe to it. Subsidiary ledger

38. Subsidiary are normally set up for Accounts Renewable and Accounts Payable. The Accounts receivable subsidiary ledger, also known as customer subsidiary ledger, gives more detailed information on the transaction on each credit customer and provides information on which customers owe money to the business and how much.

39. The Accounts Payable subsidiary ledger, also known as the supplier subsidiary ledger, gives details on the transactions of the business with each account supplier and provide information on which suppliers the business owes money to and how much.

40. A typical subsidiary ledger includes the following information: the related control account; name of the customer/supplier; page number; date of the transaction; items column; reference column; debit money column: credit money column; and the ( i ) account balance column

41. A sample subsidiary ledger is presented below: ACCOUNTS PAYABLE - A Date Items Ref Dr Cr Balance

42. QUIZ

43. 1. These are records in which all accounts and transactions of a business are maintained on a regular basis.

44. 2. What are the two major types of books of accounts?

45. 3. It is the taxing authority in the Philippines

46. 4. It functions as a financial diary. It is commonly referred to as the book of original entry.

47. 5-6. Give the two (2) types of journals

48. 7. It is a type of journal that is used to record recurring transaction.

49. 8. Give the four (4) types of special journal.

50. 9. It is a journal used to record purchase of merchandise on account.

51. 10. Also known as the master journal.

52. 11. It is a collective record of individual accounts used by a business.

53. 12-13. Give the two (2) common types of ledgers.

54. 14. It is used to accumulate and classify individual transactions from the journal.

55. 15. It is used to provide detailed information about a specific ledger account.

56. members Charlize Marie Dula-ogon ( Powerpoint Creator) Angel Tanio (Reporter) Kristine Mae Ambrocio ( Quiz Facilitator) Missy Baracena (Reporter) Jennifer Regencia (Reporter)