Chapter 5 Books of Accounts and Double-entry System Learning Ojectives 1. Identify the uses of the two books of accounts. 2. Illustrate the format of general and special journals. 3. Illustrate the format of general and subsidiary ledgers. Chapter 5: Books of Accounts & Double- entry System (FAR by: Millan) The Books of Accounts
1. Journal (General and Special)
2. Ledger (General and Subsidiary)
Chapter 5: Books of Accounts & Double-entry System (FAR by: Millan)
Journal
The journal, also called the “book of original
entries,” is the accounting record where business transactions are first recorded. 1. Special Journal – is used to record transactions with similar nature (e.g., Sales journal, Purchases journal, Cash receipts journal, and Cash disbursements journal) 2. General Journal – All other transactions that cannot be recorded in the special journals are recorded in the general journal. Chapter 5: Books of Accounts & Double-entry System (FAR by: Millan) Ledger
• The ledger is used to classify the effects of
business transactions on the accounts. It is also called the “book of final entries.” 1. General ledger – contains all the accounts appearing in the trial balance. 2. Subsidiary ledger – provides a breakdown of the balances of controlling accounts.
Chapter 5: Books of Accounts & Double-entry System (FAR by: Millan)
Chapter 5: Books of Accounts & Double-entry System (FAR by: Millan) Format of the General Journal
Chapter 5: Books of Accounts & Double-entry System (FAR by: Millan)
Formats of the Ledgers
Chapter 5: Books of Accounts & Double-entry System (FAR by: Millan)
Double-entry System • Concept of duality – each transaction is recorded in two parts – debit and credit • Concept of equilibrium – each transaction is recorded in terms of equal debits and credits.
Chapter 5: Books of Accounts & Double-entry System (FAR by: Millan)
Normal balances of accounts
Chapter 5: Books of Accounts & Double-entry System (FAR by: Millan)
Rules of Debits and Credits
Chapter 5: Books of Accounts & Double-entry System (FAR by: Millan)
Chapter 5: Books of Accounts & Double-entry System (FAR by: Millan) Contra and Adjunct accounts • Contra accounts are presented in the financial statements as deduction to their related accounts. • Adjunct accounts are presented in the financial statements as addition to their related accounts.
Chapter 5: Books of Accounts & Double-entry System (FAR by: Millan)