Video Lesson Chapter 7 Fabm2 Journal and Ledger

Chapter 7:
Accounting Books
- Journal and Ledger
Maureen A. Acob/ Glaiza S. Estrecho

Teachers
FUNDAMENTALS OF ACCOUNTING, BUSINESS,

AND MANAGEMENT 2
OBJECTIVES:
1. Learn the use of journal and general

ledger.
2. Prepare journal entries to record
business transactions.
3. Post the transaction in the general
ledger.
4. Determine the normal balances of the
accounts using the t-account.
ACTIVITY:
Practice Set No. 1

(Friendly Trucking) On April 1, 2016, Nels
Ferrer organized a business called
Friendly Trucking.
During April, the company entered into
the following transactions:
Apr 1 Nels Ferrer deposited Php500,000 cash in a bank
account in the name of the business.
Apr 1 Purchased for Php250,000 a transportation

equipment to be use in the business. Nels paid 50%
as down payment while the balance will be paid on
May 15, 2016
Apr 1 Paid rental for the month of April, Php 5,000

Apr 5 Earned and collected trucking income from Ryan,
Php8,000
Apr 8 Earned trucking income from Jesper, Php 30,000 on

account. Jesper will pay on May 8, 2016
Apr 10 Paid salaries of drivers, Php10,000
Apr 15 Rented the vehicle to Joshua for Php35,000,
Joshua paid Php20,000 on that date and the
balance on April 20
Apr 18 Paid electric bills for the month, Php2,000

Apr 20 Collected from Joshua the balance of his April
15 account
Apr 25 Purchased office supplies, Php2,300

Apr 29 Earned and collected trucking income from Jay,
Php 18,000
Instructions:
a. Journalize the above
transactions.
b. Post to ledger using the T-
account format.
c. Prepare the unadjusted trial
balance, as of April 30, 2016.
SOLUTION:
a. Journalize the transactions
Date Account Title & Ref Debit Credit
Explanation
1-Apr Cash 500,000

Ferrer, Capital 500,000
Transportation Equipment 250,000
Cash 125,000
Accounts Payable 125,000
Rent Expense 5,000

Cash 5,000
Date Account Title & Explanation Ref Debit Credit
5-Apr Cash 8,000

Service Revenue 8,000
8-Apr Accounts Receivable 30,000

10-Apr Salaries Expense 10,000

Cash 10,000
15-Apr Cash 20,000

Accounts Receivable 15,000
18-Apr Utilities Expense 2,000
Cash 2,000
Date Account Title & Explanation Ref Debit Credit
20-Apr Cash 15,000

25-Apr Supplies Expense 2,300
Cash 2,300
29-Apr Cash 18,000

b. Post to general ledger using T-account format
Cash
500,000 125,000
8,000 5,000
20,000 10,000
15,000 2,000
18,000 2,3000
561,000 144,300
416,700
Account
Receivable
30,000 15,000
15,000
45,000 15,000
30,000
Vicente, Capital
500,000
500,000
Service
Revenue
8,000
30,000
35,000
18,000
91,000
Rental Expense
5,000
5,000
Salaries Expense
10,000
10,000
Utilities Expense
2,000
2,000
Supplies Expense
2,300
2,300

Account Title Debit Credit

Cash 416,700
Transportation Eqpt 250,000
Accounts Payable 125,000
Ferrer, Capital 500,000
Rental Expense 5,000
Salaries Expense 10,000
Utilities Expense 2,000
Supplies Expense 2,300
TOTAL 716,000 716,000
C. Prepare unadjusted trial balance

General Journal -the simplest type of journal.
- is unique among journals because it may be used to record any
type of business transactions.
Special Journal -
is designed to record a
particular type of
transaction efficiently and
quickly..
Examples of special journals and their use are the following:
a. Cash Receipts Journal – is used to record all
cash that had been received.
b. Cash Disbursements Journal – is used to record
all transactions involving cash payments.
c. Sales Journal (Sales on Account Journal) – is
used to record all sales on credit (on account)
d.Purchase Journal (Purchase on Account Journal)
– is used to record all purchases of inventory
on credit (or on account)
The Importance of Using a Journal.

• The journal shows all information

concerning a particular transaction.
• The journal provides a chronological
record of all the financial events in the
business over time.
The entries in the journal are arranged
by date that makes it necessary to locate
a particular event.
A ledger -
is a means of
accumulating in one place
all the information about
changes in an asset,
liability, equity, income,
and expense accounts.
General Ledger
Account: Cash Account No. 1000
Date Item Ref Debit Credit Balance

A general ledger is often

called a T-Account because of
its resemblance to the letter T.
ACCOUNT TITLE
(Ex. Cash)
Left Side Right Side
or Debit Side or Credit Side

A T-Account is a simplified
form of general ledger. A
sample of a T-account is
shown below:
In order to determine the ending balance of
each account using the “T-account”,
the beginning balance is plot in the
appropriate debit or credit side, then total
debits and credits are then determined. If the
account has a beginning balance on the
debit side, all the debits during the period is
added to the beginning then all the credits
are deducted. There is a debit balance of the
account if the sum of the beginning balance
and the total debits exceeds the total credits.
a. Asset Accounts – Debit Balance;
Contra Asset Account is credit.
Contra Asset Accounts are:
Allowance for Bad Debts - Account Receivable
Accumulated Depreciation (Accum. Deprn.) – Store Equipment
Accum. Deprn. – Off Eqpt
Accum. Deprn – Trans Eqpt
Accum. Deprn – Building
The normal balances of these accounts

b. Liability Accounts – Credit Balance
c. Equity Accounts – Owner’s, Capital
account has a normal balance on the credit
side while the Owner’s, Withdrawal
account has a normal balance on the debit
side.
d. Income – Credit Balance
e. Expense – Debit Balance
Statement of Financial Position Accounts
Increase (Normal Decrease
Balance)
Asset Debit Credit
Liability Credit Debit
Owner’s Capital Credit Debit
Owner’s Withdrawal Debit Credit
Income Credit Debit
Expense Debit Credit
A summary of the normal

balance of the account
When an account that normally has a credit
balance actually has a debit balance, it may
mean that an error have occurred or that an
unusual situation may exist.
For example, the accounts receivable
account normally have a debit balance, if at
the end of the period the actual balance is on
the credit side, it may mean that there was
overpayment of the customer or an error in
the recording processed has occurred.
An entry the involved two accounts only,
one debit and one credit is called a
simple journal entry.
An entry that requires three or more

accounts is a compound entry.

Compound Journal Entry

To illustrate:
Ariel Garden Supply Store acquire a land for P800,000. Ariel paid
P300,000 cash and issued a promissory note for the balance
simple entry: a compound entry:
(1) Cash 300,000 Cash 300,000
Land 300,000 Land 800,000
To record purchased of land by

Notes Payable 500,000
paying cash

To record purchased of
(2) Land 500,000 land by paying cash and issuance of
a promissory note.
Note Payable 500,000
To record purchased of land by

issuing promissory note

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Chapter 7:

Maureen A. Acob/ Glaiza S. Estrecho

FUNDAMENTALS OF ACCOUNTING, BUSINESS,

1. Learn the use of journal and general

Practice Set No. 1

Apr 1 Purchased for Php250,000 a transportation

Apr 1 Paid rental for the month of April, Php 5,000

Apr 8 Earned trucking income from Jesper, Php 30,000 on

Apr 18 Paid electric bills for the month, Php2,000

Apr 25 Purchased office supplies, Php2,300

1-Apr Cash 500,000

Rent Expense 5,000

5-Apr Cash 8,000

8-Apr Accounts Receivable 30,000

10-Apr Salaries Expense 10,000

15-Apr Cash 20,000

20-Apr Cash 15,000

25-Apr Supplies Expense 2,300

29-Apr Cash 18,000

Service Revenue 18,000

Account Title Debit Credit

C. Prepare unadjusted trial balance

• The journal shows all information

Date Item Ref Debit Credit Balance

A general ledger is often

The normal balances of these accounts

Asset Debit Credit

Liability Credit Debit

Owner’s Capital Credit Debit

Owner’s Withdrawal Debit Credit

Income Credit Debit

Expense Debit Credit

A summary of the normal

An entry that requires three or more

Compound Journal Entry

To record purchased of land by

To record purchased of land by

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