General Ledger

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TECHNICAL TERMS

 Account is a formal record that represents, in words, money or other unit


of measurement, certain resources, claims to such resources, transactions
or other events that result in changes to those resources and claims
 Asset represents future benefit to the company with reliable
measurement
 Balance is the Sum of DEBIT entries minus the SUM of CREDIT entries
in an ACCOUNT. If positive, the difference is called a DEBIT BALANCE; if
negative, a CREDIT BALANCE
 Capital is called equity.
 Credit (cr) - means an entry to the right hand side of an account. Entry
on the right side of a DOUBLE-ENTRY BOOKKEEPING system that
represents the reduction of an ASSET or expense or the addition to a
LIABILITY or REVENUE. (See DEBIT.)
 Debit (dr) - means an entry to the left hand side of an account. Entry on
the left side of a DOUBLE-ENTRY BOOKKEEPING system that represents
the addition of an ASSET or expense or the reduction to a LIABILITY or
REVENUE. (See CREDIT.)
 Drawing is when a business proprietor draws money for personal needs
 Expenses represent the outflow of assets (or increases in liabilities) due
to a company’s operating activities.
 General Ledger is the collection of all ASSET, LIABILITY, owners’ EQUITY,
REVENUE, and expense accounts. This is a book of accounts in which
data from transactions recorded in journals are posted and thereby
classified and summarized. Also called ledger.
 Ledger is a tool used for classifying and summarizing information about
increases, decreases, and balances of items in the chart of accounts.
 Liability represents obligations, payables or debts owed. DEBTS or
obligations owed by one entity (DEBTOR) to another entity (CREDITOR)
payable in money, goods, or services.
 Nominal Accounts are accounts that are temporary and their balances
are being closed by the end of the period.
 Posting is the process of transferring figures from the journal to the ledger
accounts.
 Real Accounts are the account that is permanent and their balances are
carried forward from one fiscal year to the next.
 Subsidiary Ledger is a group of subsidiary accounts the sum of the
balances of which is equal to the balance of the related control account in
the general ledger.

FIGURE 1.1 THREE-AMOUNT COLUMN FORMAT


ACCOUNT TITLES: ACCOUNT No.

DATE DESCRIPTION R DEBIT CREDIT BALANCE

FIGURE 1.2 T-ACCOUNT FORMAT


ACCOUNT TITLE

DEBIT CREDIT
Use of an three-amount column format

A T-account looks like English alphabet "T" which is why a ledger account is also
referred to as "T" account.

A T-Account has three main parts:


1. Title is the name of account
2. Debit is on the left hand side
3. Credit is on the right hand side
Here are some examples of transaction using a T-account:

May 1 Penaco started his new business by depositing P 250,000.00 in a bank


account in the name of Penaco WebPage Express at Equitable PCI-CDO
Branch.

Asset (Increase) = Owner’s Equity (Increase)

Cash Penaco, Capital

Debit Credit Debit Credit


(+) (-) (-) (+)

5/1 250,000 5/1 250,000

This transaction increased both the asset – cash and owner’s equity. According
to the rules of debit and credit, an increase in asset is recorded as debit while an
increase in owner’s equity is recorded as credit; thus, the entry is to debit cash and
credit Penaco, Capital. The transaction dates are placed on the left side of the amount
for reference.

May 2 Computer equipment is acquired by issuing a P 50,00.00 note payable to


Microsoft Office Systems. The note is due in six months.

Asset (Increase) = Liabilities (Increase)

Computer Equipment Notes Payable

Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


Debit Credit Debit Credit
(+) (-) (-) (+)

5/2 50,000 5/2 50,000

The transaction increased by P 50,000 the asset – computer equipment and the
liability – notes payable. Computer equipment must be debited and notes payable must
be credited.

May 3 Penaco paid P 15,000.00 to Liceo Grande Suites for rent on the office
studio for the month of May, June and July.

Assets (Decrease) = Assets (Increase)

Cash Prepaid Rent

Debit Credit Debit Credit


(+) (-) (+) (-)

5/1 250,000 5/3 15,000 5/3 15,000

The entity paid advance rent for three-months. A resource having future
economic benefit – prepaid rent, is acquired for a cash payment of P 15,000. Increases
in assets are recorded by debits and decreases in assets are recorded by credits. The
transaction resulted to a debit to prepaid rent and a credit to cash for P 15,000. The
prepaid rent is consumed based on the passage of time so that after one month, P 5,000
of the prepaid rent will be transferred to the rent expense account.

May 4 Received advance payment of P 18,000.00 from Roa Leisure Hotel for web
site updating for the next three month.

Assets (Increase) = Liabilities (Increase)

Cash Unearned Revenues


Debit
Credit Debit Credit
(+) (-) (-) (+)

Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


5/1 250,000 5/3 15,000 5/4 18,000
5/4 18,000

The entity has an obligation to Roa Leisure Hotel for the next three months. This
liability is called unearned revenues. The asset – cash is increased by a debit of P 18,000
and the liability – unearned revenues is increased by a credit of P 18,000. As it renders
service, the entity discharge its obligation at a rate of P 6,000 per month for the next
three months.

May 5 Computer equipment costing P 178,000 is acquired on cash basis.

Assets (Decrease) = Assets (Increase)

Cash Computer Equipment

Debit Credit Debit Credit


(+) (-) (+) (-)

5/1 250,000 5/3 15,000 5/2 50,000


5/4 18,000 5/5 178,000 5/5 178,000

This transaction increased the asset – computer equipment and decreased the
asset – cash. Assets are increased by debits and decreased by credits; thus, computer
equipment is debited and cash is credited for P 178,000.

May 9 Computer supplies in the amount of P 9,000.00 are purchased on account.

Assets (Increase) = Liabilities (Increase)

Computer Supplies Accounts Payable

Debit Credit Debit Credit


Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


(+) (-) (-) (+)

5/9 9,000 5/9 9,000

The asset – computer supplies is increased by a debit of P 9,000 while the liability
account – accounts payable is increased by a credit for the same amount.

May 11 Penaco WebPage Express collected P 77,000.00 in cash for designing web
sites.

Assets (Increase) = Owner’s Equity (Increase)

Cash Design Revenues

Debit Credit Debit Credit


(+) (-) (-) (+)

5/1 250,0005/3 15,000


5/4 18,0005/5 178,000
5/11 77,000 5/11 77,000

The transaction increased the asset – cash and increased the income account –
design revenues. Assets are increased by debits, income are increased by credits; hence,
a debit of P 77,000.00 to cash and a credit of P 77,000.00 to design revenues is made.
Increases in income increase owner’s equity.

May 16 Penaco paid P 15,000.00 to Bills Unlimited for the semi-monthly utilities.

Assets (Decrease) = Owner’s Equity (Decrease)

Cash Utilities Expense


Debit Credit Debit Credit

Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


(+) (-) (+) (-)

5/1 250,000 5/3 15,000


5/4 18,000 5/5 178,000
5/11 77,000 5/16 15,000 5/16 15,000

Expenses are increased by debits and assets are decreased by credits; therefore,
utilities expense is debited and cash credited for P 15,000. Increases in expenses
decrease owner’s equity.

May 17 Penaco billed clients P 25,000.00 for services already rendered during the
month.

Assets (Increase) = Owner’s Equity

Accounts Receivable Design Revenues

Debits Credit Debit Credit


(+) (-) (-) (+)

5/11 77,000
5/17 25,000 5/17 25,000

Assets are increased by debits, income are increased by credits. Increase in income
increase owner’s equity. A debit of P 25,000 to accounts receivable and a credit of P
25,000 to the income account – design revenues is needed.

May 19 Penaco partially paid P 7,000.00 for the May 9 purchase of computer
supplies.

Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


Assets (Decrease) = Liabilities (Decrease)

Cash Accounts Payable

Debit Credit Debit Credit


(+) (-) (-) (+)

5/1 250,000 5/3 15,000 5/9 9,000


5/4 18,000 5/5 178,000
5/11 77,000 5/16 15,000
5/19 7,000 5/19 7,000

Assets are decreased by credits while liabilities are decreased by debits. The
transaction is recorded by debiting accounts payable and crediting cash for P 7,000
each.

May 20 Received checks totaling P 21,000.00 from clients for billing dated May 17.

Assets (Increase) = Assets (Decrease)

Cash Accounts Receivable

Debit Credit Debit Credit


(+) (-) (+) (-)

5/1 250,000 5/3 15,000 5/17 25,0005/20 21,000


5/4 18,000 5/5 178,000
5/11 77,000 5/16 15,000
5/20 21,000 5/19 7,000

Collections on account reduced the asset – accounts receivable but increased the
asset – cash. Assets are increased by debits and decreased by credits; thus, a debit to
cash for P 21,000 and a credit to accounts receivable for P 21,000 is made.

Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


May 21 Penaco withdrew P 20,000.00 from the business for his personal use.

Assets (Decrease) = Owner’s Equity (Decrease)

Cash Penaco, Withdrawal

Debit Credit Debit Credit


(+) (-) (+) (-)

5/1 250,000 5/3 15,000 5/21 20,000


5/4 18,000 5/5 178,000
5/11 77,000 5/16 15,000
5/20 21,000 5/19 7,000
5/21 20,000

Withdrawals are reductions of owner’s equity but are expenses of the business
entity. A withdrawal is a personal transaction of the owner that is exactly the opposite
of an investment. This transaction increased the withdrawals account but reduced cash.
Debits record increases in the withdrawals account and credits record decreases in
asset accounts; thus, a debit to withdrawals and a credit to cash for P 20,000 each is
necessary.

May 27 Daganta billed Penaco for P 8,000.00 internet ads. Penaco will pay next
month.

Liabilities (Increase) = Owner’s Equity (Decrease)

Accounts Payable Advertising Expense

Debit Credit Debit Credit


(-) (+) (+) (-)

5/19 7,000 5/9 9,000 5/27 8,000

Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


5/27 8,000

This transaction increased the expense – advertising expense and increased the liability
– accounts payable by P 8,000. Expenses are increased by debits while liabilities are
increased by credits; hence, an entry to debit advertising expense and to credit accounts
payable for P 8,000 is needed.

May 31 Penaco paid his assistant web designer salaries of P 15,000.00 for the
month.
Assets (Decrease) = Owner’s Equity (Decrease)

Cash Salaries Expense

Debit Credit Debit Credit


(+) (-) (+) (-)

5/1 250,000 5/3 15,000 5/31 15,000


5/4 18,000 5/5 178,000
5/11 77,000 5/16 15,000
5/20 21,000 5/19 7,000
5/21 20,000
5/31 15,000

Expenses are increased by debits and assets are decreased by credits. Hence,
salaries expense is debited for P 15,000 and cash credited for the same amount.
Increases in salaries expense decrease owner’s equity.

Use of Three-Column Ledger

In practice accounts are usually prepared in three column ledger


account or running balance method, layout especially, when business uses an
integrated computerized system.

The major advantage of this form is that it shows the latest account balance at a
glance. This form of account has six columns.

Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


 Date column, to show date of the transaction for both debt and credit entries.
 Details column, to provide cross reference with regard to the other accounts involved
in the ledger.
 Folio column, to provide additional reference of the item recorded in the account.
 Debit amount column, to record the monetary value of the item debited.
 Credited amount column, to record the monetary value of the item credited.
 Balance amount column, to show the net balance after each and every transaction,
therefore this layout is called running balance method.

Below are examples of three-column ledger:

Cash Account:

Date Particulars PR Debit Credit Balance

Beginning Balance - - -

Oct. 1 To Capital 40000 - 40000

Oct. 3 By Supplies - 700 39300

Oct. 8 By Truck - 10000 29300

Oct. 18 By Rent - 750 28550

Oct. 19 By Service Revenue 1200 - 29750

Oct. 23 By Wage - 4100 25650

Oct. 25 By Prepaid Insurance - 2960 22690

Oct. 26 By A/C Payable - 2400 20290

Oct. 28 To Service Revenue 1400 - 21690

Oct. 29 By Misc. Expense - 330 21360

Oct. 30 By Wage Exp. - 4300 17060

Oct. 31 By Drawings - 3000 14060

Equipment Account

Date Particulars PR Debit Credit Balance

Oct. 1 To Capital - ABC Traders 3000 3000

Oct. 15 To A/C Payable 1500 4500

Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


ABC Trader Capital Account

Date Particulars PR Debit Credit Balance

Oct. 1 By Cash Php 20000 Php 20000

Oct. 1 By Equipment 3000 23000

Supplies Account

Date Particulars PR Debit Credit Balance

Oct. 3 To Cash Php 700 Php 700

Oct. 15 To A/C Payable 2600 3300

Truck Account

Date Particulars PR Debit Credit Balance

Oct. 8 To Cash Php 10000 Php 10000

Oct. 15 To A/C Payable 24000 14000

Rent Expense Account

Date Particulars PR Debit Credit Balance

Oct. 26 To Cash Php 750 Php 750

Services Revenue Account

Date Particulars PR Debit Credit Balance

Oct. 19 By Cash Php 1200 Php 1200

Oct. 28 By Cash 1400 2600

Wages Account

Date Particulars PR Debit Credit Balance

Oct. 23 To Cash Php 4100 Php 4100

Oct. 30 To Cash 4300 8400

Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


Prepaid Insurance Account

Date Particulars PR Debit Credit Balance

Oct. 25 To Cash Php 2960 Php 2960

Truck Expense Account

Date Particulars PR Debit Credit Balance

Oct. 29 A/C Payable Php 410 Php 410

Misc. Expense Account

Date Particulars PR Debit Credit Balance

Oct. 29 To Cash 330 330 Dr.

ABC Traders - Drawing Account

Date Particulars PR Debit Credit Balance

Oct.31 To Cash 3000 3000 Dr.

Notes Payable Account

Date Particulars PR Debit Credit Balance

Oct. 8 To Truck 24000 24000 Cr.

Accounts Payable Account

Date Particulars PR Debit Credit Balance

Oct. 15 To Equipment 1500 1500 Cr.

Oct. 22 To Supplies 2600 4100 Cr.

Oct. 26 To Cash 2400 - 1700 Cr.

Oct. 29 To Truck 410 2110 Cr.

There are seven (7) steps in posting a journal entry for (refer Figure 2.1):
Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


1. Enter the date of the journal entry in the date column of the account debited.
Use the date of the journal entry, not the date on which the posting is done.
Write the year and month or year changes. The day, however, is entered.

2. The description column on the ledger account is usually left blank. Some
businesses use this space to write in the source document number.

3. in the ledger account posting reference (Post. Ref.) Column, identify where
the journal entry is recorded. Enter a letter a specific journal and journal page
number (GJ-1, GJ stands for General Journal).
4. Enter the debit amount in the debit column of the ledger account.
5. Compute and record the new account balance in the balance column. Every
amount posted will either increase or decrease the balance of that account.

6. Return to the journal and, in the posting reference column, enter the account
number of the ledger account to which you just posted the debit part of the
journal entry. Be sure it is entered on the same line as the debit entry. This
step of the posting process is very important. The notation in the posting
reference column of the journal indicates that the journal entry has been
posted. The posting reference also shows the account to which the entry is
posted. Never write an account number in the posting reference column until
after you have posted.
7. Repeat steps 1-6 for the credit part of the journal entry.

GENERAL JOURNAL
PAGE 1
DATE DESCRIPTION R DEBIT CREDIT
1 20__ 1
2 Aug. 1 Cash in Bank GL101 25 0 0 0 00 2
3 R. Cario, Capital GL301 25 0 0 0 00 3
4 To record investment of the owner 4
5 5
6 Enter the account

number in the
4 Enter the
general journal
2 the
1 Enter Description
date of thecolumn 3 Enter the journal debit amount reference
Usually blank
journal entry letter and page number
column
in reference column 5 Compute the

new balance

ACCOUN TITLES: Cash in Bank ACCOUNT No. 101

DATE DESCRIPTION R DEBIT CREDIT BALANCE


20__
Aug. 1 GJ1 25 0 0 0 00 25 0 0 0 00

7 Repeat steps 1-6 for the credit Date Developed: Document No.
part of journal entry
CBLM on FEBRUARY 2O16 Issued by:
Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


ACCOUN TITLES: R. Cario, Capital ACCOUNT No. 301

DATE DESCRIPTION R DEBIT CREDIT BALANCE


20__
Aug. 1 GJ1 25 0 0 0 00 25 0 0 0 00

Figure 2.1 Posting from General Journal to General Ledger

TASK SHEET 2.2-1

A. Instructions: Post the following journal entries to the General ledger.

2015 PARTICULARS F DEBIT CREDIT


Mar 1 Cash P 850,000
R. Cario, Capital P 850,000
To record initial investment by
the owner.

2 Laundry Supplies 90,000


Accounts Payable 90,000
To record purchase of supplies
on account.

3 Laundry Equipment 150,000


Cash 150,000
To record purchase of
equipment.

4 Accounts Receivable 80,000


Laundry Income 80,000
To rendered service on account

10 Taxes and Licenses 4,000


Cash 4,000
To record payment for licenses.

12 R. Cario, Drawing 10,000


Cash 10,000
To record withdrawal by the
owner for his personal use.

17 Cash 100,000
Notes Payable 100,000
To record borrowed money from
bank with promissory note

21 Cash 45,000
Accounts Receivable 45,000
To record collection from
customer’s account.

Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


25 Accounts Payable 60,000
Cash 60,000
To record payment to creditor.

30 Rent Expense 5,000


Utilities Expense 12,000
Salary Expense 10,000
Cash 27,000
To record payment for various
expenses.

GENERAL LEDGER

Account Title: Cash Account No. 110

DATE PARTICULARS F DEBIT CREDIT BALANCE


Mar 1 Investment GJ-1 P 850,000
3 Purchase-Equipment GJ-1 P150,000
10 Payment-Taxes GJ-1 4,000
12 Withdrawal GJ-1 10,000
17 Loan GJ-1 100,000
21 Collection GJ-1 45,000
25 Payment-creditor GJ-2 60,000
30 Payment-expenses GJ-2 27,000

Account Title: Accounts Receivable Account No. 120

DATE PARTICULARS F DEBIT CREDIT BALANCE


Mar 4 Revenue GJ-1 P 80,000 P 80,000
21 Collection GJ-1 P 45,000 35,000

Account Title: Laundry Supplies Account No. 130

DATE PARTICULARS F DEBIT CREDIT BALANCE


Mar 2 Purchase-Supplies GJ-1 P 90,000 P 90,000

Account Title: Laundry Equipment Account No. 130

DATE PARTICULARS F DEBIT CREDIT BALANCE


Mar 3 Purchase-on account GJ-1 P 150,000 P 150,000

Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


Account Title: Notes Payable Account No. 210

DATE PARTICULARS F DEBIT CREDIT BALANCE


Mar 17 Bank Loan GJ-1 P 100,000 P 100,000

Account Title: Accounts Payable Account No. 220

DATE PARTICULARS F DEBIT CREDIT BALANCE


Mar 2 Purchase-supplies GJ-1 P 90,000 P 90,000
25 Payment GJ-2 P 60,000 30,000

Account Title: R. Cario, Capital Account No. 310

DATE PARTICULARS F DEBIT CREDIT BALANCE


Mar 1 Investment GJ-1 P 850,000 P 850,000

Account Title: R. Cario, Drawing Account No. 320

DATE PARTICULARS F DEBIT CREDIT BALANCE


Mar 12 Withdrawal GJ-1 P 10,000 P 10,000

Account Title: Laundry Income Account No. 410

DATE PARTICULARS F DEBIT CREDIT BALANCE


Mar 4 Revenue-on account GJ-1 P 80,000 P 80,000
Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


Account Title: Salaries Expense Account No. 510

DATE PARTICULARS F DEBIT CREDIT BALANCE


Mar 30 Payment-expense GJ-2 P 10,000 P 10,000

Account Title: Rent Expense Account No. 520

DATE PARTICULARS F DEBIT CREDIT BALANCE


Mar 30 Payment-expense GJ-2 P 5,000 P 5,000

Account Title: Utilities Expense Account No. 530

DATE PARTICULARS F DEBIT CREDIT BALANCE


Mar 30 Payment-expense GJ-2 P 12,000 P 12,000

Account Title: Taxes and Licenses Account No. 530

DATE PARTICULARS F DEBIT CREDIT BALANCE


Mar 10 Payment-expense GJ-2 P 4, 000 P 4, 000

Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00


Date Developed: Document No.

CBLM on FEBRUARY 2O16 Issued by:


Bookkeeping NC III Date Revised:

Page 8 of 33
FSUCTI
Posting Transaction Developed by:

RECHEE G. ALFEREZ Revision # 00

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