The document provides information about journalizing and the double-entry bookkeeping system. It defines key terms like journal, books of original entry, debit and credit, general journal, and special journals. It describes the steps to record a transaction in a journal, including recording the date, debit and credit amounts, explanation, and reference number. It also distinguishes simple and compound journal entries and defines an opening entry as the first entry made to record initial owner investments.
The document provides information about journalizing and the double-entry bookkeeping system. It defines key terms like journal, books of original entry, debit and credit, general journal, and special journals. It describes the steps to record a transaction in a journal, including recording the date, debit and credit amounts, explanation, and reference number. It also distinguishes simple and compound journal entries and defines an opening entry as the first entry made to record initial owner investments.
The document provides information about journalizing and the double-entry bookkeeping system. It defines key terms like journal, books of original entry, debit and credit, general journal, and special journals. It describes the steps to record a transaction in a journal, including recording the date, debit and credit amounts, explanation, and reference number. It also distinguishes simple and compound journal entries and defines an opening entry as the first entry made to record initial owner investments.
The document provides information about journalizing and the double-entry bookkeeping system. It defines key terms like journal, books of original entry, debit and credit, general journal, and special journals. It describes the steps to record a transaction in a journal, including recording the date, debit and credit amounts, explanation, and reference number. It also distinguishes simple and compound journal entries and defines an opening entry as the first entry made to record initial owner investments.
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JOURNALIZING
INFORMATION SHEET 1.3-1
What is a Double-Entry System of Bookkeeping? Double-Entry System of Bookkeeping The double-entry system of bookkeeping recognizes the two-fold effects of a transaction; the value received (debit) and the value parted with (credit). This justifies the equality of debit and credit amounts. Because of the two-fold effect recognition, both sides of the fundamental equation will always be equal. Concepts of Journalizing Journalizing is the act of recording transactions for the first time in an accounting record book called the journal. The journal is often referred to as “book of original entry”. Journalizing is the first step in the accounting cycle. It is the process of recording business transactions in a journal. What are books of accounts? Books of Accounts The records that are used and kept by the business in storing all its accounting data are called “books of accounts.” There are two sets of books that are used by the business. They are the “books of original entry” otherwise known as the “journal” and the “books of final entry” or the “ledger” . “Books of Original Entry” Also known as Journal. It is the accounting book wherein the business transactions and events are recorded for the first time. The simplest form of journal is the two-column journal. There are various kinds of journal records and they are called “special journals.” Functions of Journal 1. To show all information about an accountable event in one place. 2. To provide a chronological record of accountable events. 3. To facilitate posting transactions data to the ledger. Types of Journal 1. General Journal – is a business document in which transactions are recorded, the date of transaction, the accounts to be debited and credited, the amount of debit or credit, entries and explanation of each transaction. 2. Special Journal – a chronological recording of transactions possessing common characteristics. Examples are: a. Sales Journal b. Purchases Journal c. Cash Receipts Journal d. Cash Disbursement Journal Advantages of Special Journal 1. Eliminate repetitive work. 2. Makes possible division of labor and hence, timely reports. 3. Results in higher degree of control. 4. Results in greater efficiency. Special Journal Special Journal Special Journal Special Journal Special Journal a. Sales Journal - only transactions involving “sale of merchandise on account “are recorded in this book or wherever a charge invoice is issued to a customer. b. Purchases Journal - only transactions involving “purchase of merchandise on account” are recorded in this book or wherever we received a charge invoice from supplies. c. Cash Receipts Journal - only transaction involving “receipts of cash” are recorded in this book or whenever Cash Invoice or Official Receipt issued to a customer. d. Cash Disbursement Journal - only transaction involving “cash payments” are recorded in this book. General Journal General Journal Even special journals are used, a General Journal will still be used but it is limited to recording of transactions which cannot be recorded in the above mentioned books. In other words, only transactions that cannot be entered in a Special Journal are recorded in the General Journal. Examples of transactions that are recorded in the General Journal are as follows: • Original investment of the owner. • Return of merchandise bought on account. • Return of merchandise by a customer that was sold on account. • Adjusting and correcting journal entries. • Closing and Reversing Entries. Steps in recording a transaction in a journal or procedure in journalizing: Step 1 – Record the date. GENERAL JOURNAL PAGE __ DATE ACCOUNT NAME AND DESCRIPTION REF DEBIT CREDIT Jan 5 Debit entry Credit entry Description
12 Debit entry Credit entry Description
15 Debit entry Credit entry Description
Feb 14 Debit entry
Credit entry Description
Steps in recording a transaction in a journal or procedure in journalizing: Step 2 and 3 – Record the debit and the credit.
GENERAL JOURNAL PAGE __
DATE ACCOUNT NAME AND DESCRIPTION REF DEBIT CREDIT Jan 5 Cash 50 000 Mr. A, Capital 50 000
Steps in recording a transaction in a journal or procedure in journalizing: Step 4 – The explanation is written on the next line after the last credit entry.
GENERAL JOURNAL PAGE __
DATE ACCOUNT NAME AND DESCRIPTION REF DEBIT CREDIT Jan 5 Cash 50 000 Mr. A, Capital 50 000 To record initial investment of the owner.
Steps in recording a transaction in a journal or procedure in journalizing: Step 5 – Between entries there must be left single-line spacing.
GENERAL JOURNAL PAGE __
DATE ACCOUNT NAME AND DESCRIPTION REF DEBIT CREDIT Jan 5 Cash 50 000 Mr. A, Capital 50 000 To record initial investment of the owner.
8 Supplies Inventory 10 000 Accounts Payable 10 000 To record purchase of supplies on account. Steps in recording a transaction in a journal or procedure in journalizing: Step 6 – The folio (“F” or Post –reference column or Reference column) is used to indicate the account number in the ledger to which the entry is transferred.
GENERAL JOURNAL PAGE __
DATE ACCOUNT NAME AND DESCRIPTION REF DEBIT CREDIT Jan 5 Cash 101 50 000 Mr. A, Capital 300 50 000 To record initial investment of the owner.
Two types of journal entries: 1. Simple entry – contains one debit and one credit. Example: Cash P xxx Mr. X, Capital P xxx To record initial investment. Two types of journal entries: 2. Compound entry – contains three or more accounts. Example: Cash P xxx Furniture xxx Mr. X, Capital P xxx To record initial investment. What is an opening entry? An entry recording the initial investments of the owner is called an “opening entry.” The first entry made in the general journal is called an opening entry. An opening entry will only occur once in the life of the business. This constitutes either the recording of the initial investments of a proprietor who engaged in the business for the first time or the recording of the beginning balances of accounts in preparation for the next annual accounting period. What is an opening entry? Mr. A just started to set up his business and initially invested the following; P15,000 in Cash, P3,000 worth of Office Supplies, P40,000 worth of Computer Equipment, and an Office Building amounting to P55,000. What is an opening entry?
GENERAL JOURNAL PAGE __
DATE ACCOUNT NAME AND DESCRIPTION REF DEBIT CREDIT Jan 5 Cash 15 000 Office Supplies 3 000 Computer Equipment 40 000 Office Building 55 000 Mr. A, Capital 113 000 To record initial investment of the owner.
What is Chart of Accounts?
Chart of Accounts is a list of account titles prepared
beforehand to guide the bookkeeper and accountant of what specific titles are to be used in describing the exchanges of values in a transaction. Sample arrangement of Chart of Accounts: WELCOME LAUNDRY SHOP Chart of Accounts Account Nos. Account Names 101 Cash 112 Accounts Receivable 126 Supplies 157 Equipment 201 Accounts Payable 206 Unearned Revenue 301 Dee Ka Mao, Capital 306 Dee Ka Mao, Drawings 426 Laundry Revenue 726 Salaries Expense 732 Utilities Expense