Abms3 Topic 05 - 2022

NORIEL F.
GREGORIO
Book of Accounts – the financial
records, ledgers and journals that
make up the accounts of a
company.
This represents financial

memory of the company and are
crucial for continuity, decision-
making, analysis of company
performance and ensuring
regulatory compliance.
Book of Accounts
1. A. General Journal
-is referred to as the book of original entry. It
records business transaction in order of date using
the principles of “debit and credit”.
A general journal entry consists of the

transaction date, the accounts and amounts to be
debited and credited, and a brief explanation of the
transaction.
Format of General Journal
GENERAL JOURNAL
DATE ACCOUNT TITLES ACCT. DEBIT CREDIT
NO.
8/3/2019 Cash 110 5,000
Sales 420 5,000
To record collection from sales.
8/4/2019 Salaries Expense 520 2,500

Cash 110 2,500
To record payment of employee
salary.
Types of Journal
B. Special Journal
-are journals used to record recurring
transactions.
-are all accounting journals except for
the general journal. These journals are used to record
specific types of high-volume information that would
otherwise be recorded in and overwhelm the general
ledger. The total amounts in these journals are
periodically transferred to the general ledger in
summary form.
SPECIAL JOURNALS:
1. Cash Receipts Journal
-is where receipts of cash from any source
are recorded.
2. Cash Disbursement Journal
-where all payments of cash for any
purpose are recorded.
3. Sales Journal
-only sales of merchandise on credit are
recorded
4. Purchases Journal
-a recording of purchases on credit or
payable due to suppliers
PRACTICE:
IDENTIFY what special journal is applicable to the following
transactions:
1. Collected P10,000 from a customer in payment of his
account.
2. Bought 100 pcs. of mugs to be sold in the store
amounting to P1,500 on account.
3. Sold 5 pcs. of mugs to Mr. D on cash P320.
4. Purchased office supplies for cash P500.
5. Sold 100 pcs. of mugs to Unicup, Inc., P5,600 on
account.
6. Sold 500 pcs. Of mugs to Bugsmore, Inc., P15,300
payable 30 days after delivery.
7. Paid monthly rental P20,000.
8. Purchase on account 1000 pcs. of mugs for P12,400.
Book of Accounts
2. A. General Ledger
-is referred to as the book of final entry. It
summarized all the journal entries of an account to
get the ending balances.
An ACCOUNT is the accounting device use

in summarizing the effects of transactions on each
asset, liability, equity, revenue and expense.
Format of General Ledger
GENERAL LEDGER
CASH 110
DATE EXPLANATION REF. DEBIT DATE EXPLANATION REF. CREDIT
8/3/19 8/4/19
Collections from 5,000 Payment of 2,500
sales salary
Types of Ledger
B. Subsidiary Ledger
-used to provide detailed information
about a specific ledger account.
-stores the details for a general ledger control
account. Once information has been recorded in a
subsidiary ledger, it is periodically summarized and
posted to a control account in the general ledger, which
in turn is used to construct the financial statements of a
company.
SUBSIDIARY LEDGERS:
1. Accounts Payable Ledger

-is an accounting ledger that shows the transaction
history and amounts owed to each supplier and vendor.
2. Accounts Receivable Ledger
-is an accounting ledger that shows the transaction and
payment history of each customer to whom the business
extends credit.
3. Fixed Assets Ledger
-is the complete listing of all fixed assets that comprise the
fixed asset balances listed in the general ledger.
4. Purchases Ledger
-is a subledger in which purchases are recorded.
5. Inventory Ledger
tracks inventory transactions. The total of all transactions listed
in this ledger should match the total for the corresponding
account in the general ledger.
Double-entry system
All transactions are recorded in the

accounting records using the “double-
entry system”. Under this system, each
transaction is recorded in two parts –
debit and credit.
This involves the use of the concepts of

“duality and equilibrium”.
A. Concept of duality – views each
transaction as having a two-fold effect on
values – a value received and a value
parted with, and each transaction is
recorded using at least two accounts.
B. Concept of equilibrium – requires that

each transaction is recorded in terms of
equal debits and credits. For every peso
debited, there is a corresponding peso
credited, and vice versa.
Rules of Debit and Credit
Increase in Assets and Expenses – debit side
Decrease in Assets and Expenses – credit side
Increase in Liabilities, Capital and Income – credit side
Decrease in Liabilities, Capital and Income – debit side
ILLUSTRATION:
BALANCE SHEET ACCOUNTS:
ASSET ACCOUNTS LIABILITY ACCOUNTS
Debit for Credit for Debit for Credit for
INCREASES DECREASES DECREASES INCREASES
EQUITY ACCOUNTS
Debit for Credit for
DECREASES INCREASES
ILLUSTRATION:
INCOME SATEMENT ACCOUNTS:
EXPENSE ACCOUNTS INCOME ACCOUNTS
Debit for Credit for Debit for Credit for
INCREASES DECREASES DECREASES INCREASES
DRILLS:
Case 1: At the beginning of the period, you have a
cash balance of P2,000. During the period, you
had total cash collections amounting to P10,000
and made total cash payments of P8,000.
Compute the ending balance of your cash.
Case 2:At the beginning of the period, you have a

note payable of P1,200. During the period, you
obtained an additional loan amounting to P800 and
made total payments of P500. Compute the ending
balance of the notes payable.
Contra and Adjunct Accounts
Contra accounts – are presented in the

financial statements as deduction
to their related account.
Adjunct accounts – are presented in

the financial statements as
addition to their related accounts.
Examples of accounts with contra accounts:
ACCOUNT RELATED ACCOUNT
• Accounts Receivable ➢ Allowance for bad debts
➢ CONTRA ACCOUNT
• Building ➢ Accumulated
depreciation – Bldg.
➢ CONTRA ACCOUNT
• Equipment ➢ Accumulated
depreciation –
Equipment
➢ CONTRA ACCOUNT
DRILLS:
Case 3: Your accounts receivable has a balance of
P100,000 while the related allowance for bad
debts has a balance of P20,000. How much is the
carrying amount of your accounts receivable?
Case 4: You have a building with historical cost of

P1,000,000 and an accumulated depreciation of
P300,000. How much is the carrying amount of
your building?
o Ferrer, Rodiel C. "Fundamentals of
Accountancy, Business &
Management 1" Series of 2017
o Frias, Solita A. "Fundamentals of
Accountancy, Business &
Management 1" Series of 2017
o Valix, Conrado T. “Theory of
Accounts"
THANK YOU!

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NORIEL F.

This represents financial

A general journal entry consists of the

8/4/2019 Salaries Expense 520 2,500

An ACCOUNT is the accounting device use

1. Accounts Payable Ledger

All transactions are recorded in the

This involves the use of the concepts of

B. Concept of equilibrium – requires that

Case 2:At the beginning of the period, you have a

Contra accounts – are presented in the

Adjunct accounts – are presented in

Case 4: You have a building with historical cost of

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