FUNDAMENTALS OF
ACCOUNTANCY,
BUSINESS, AND
MANAGEMENT
CHAPTER 8
Accounting Books –
Journal and Ledgers
Learning Objectives
• To identify the two kinds of accounting books
• To understand the purpose of the journal and the
ledger
• To differentiate journal from ledger
• To use special journals
• To use the Accounts Receivable and Accounts
Payable subsidiary ledgers
• To use the General Journal for adjusting entries
What Are the Accounting Books?
Accounting books are columnar notebooks used for
recording transactions.
There are two basic accounting books:
• Journal
• Ledger
Journal
The journal is known as the book of original entry.
Think of the journal as a diary where important events
are recorded chronologically, which means that it is
organized by date of transaction.
While a diary uses sentences and paragraphs,
accountants make use of the journal entry format.
Writing on the journal is called “journalizing”.
General Ledger
The General Ledger, also known as book of accounts,
maintains at least one sheet per account.
The t-account is a rough representation of a general ledger
account.
Writing on the ledger is referred to as “posting”. Journal
entries are “posted” in the General Ledger.
The Journal Entry
What are the four BASIC
COMPONENTS of a journal entry?
1. the date of the transactions
2. the debit side
3. the credit side
4. the explanation
The Journal Entry
A journal entry should always be
“balanced”. When is it “balanced”?
A journal entry is “balanced” if the total amount on
the debit side is equal to the total amount on the
credit side.
The Journal Entry
What are two STEPS IN PREPARING a
journal entry?
Step 1: Analyze the transaction and determine
which accounts are affected and the direction of the
effect.
Step 2: Determine how to effect the direction
identified Step 1 based on the normal balances of
the accounts.
Special Journals
What are the four KINDS OF SPECIAL
JOURNALS?
1. Sales Journal
2. Purchases Journal
3. Cash Receipts Journal
4. Cash Disbursements Journal
Special Journals
1. Sales Journal
The Sales Journal is used to record credit sales.
Invoice number is recorded on the Sales Journal, which
implies that the preparation of the Sales Invoice coincides
with the recording of the sales transaction on the Sales
Journal.
Special Journals
2. Purchases Journal
The Purchases Journal is used to record purchases of
inventory made on account.
Cash purchases are not recorded in this journal. The
name of the supplier is recorded in column B. The cost
of merchandise purchased is recorded in column E.
Entries in this column represent the peso amount of
following journal entry:
Special Journals
3. Cash Receipts Journal
The Cash Receipts Journal is used to record all receipts
of cash, which are tailored for cash sales, collections of
receivables and other cash receipts transactions.
Special Journals
4. Cash Disbursements Journal
The Cash Disbursements Journal is used to record
all payments of cash.
The Cash Disbursements Journal is tailored for
cash purchases, payments to suppliers, and other
cash payments.
The Subsidiary Ledger
What are the important concepts you need to
know about the SUBSIDIARY LEDGER?
• Accountants use subsidiary ledgers to support the general
ledger.
• Not all accounts are required to have subsidiary accounts. Only
those accounts that require balances of its components have
subsidiary ledger accounts like Accounts Receivable and
Accounts Payable.
• From the journal, transactions are posted to the subsidiary ledger
accounts.
• The total posted in the subsidiary accounts are transferred to the
control account. The frequency of posting from subsidiary ledger
to general ledger control accounts may be monthly, weekly or
daily, depending on the volume of transactions.
The Subsidiary Ledger
The Subsidiary Ledger
