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Comprehensive Guide to Journals and Ledgers in Accounting

Learn the formats, uses, and differences of general and special journals, general and subsidiary ledgers, and how to accurately record business transactions in accounting.

Economy & Finance◦
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The learners… • Illustrate the format of a general journal and special journal • Illustrate the format of a general and subsidiary ledger
The learners demonstrate anunderstanding of the two major types of books of accounts, namely, journal and ledger.
The learners are able to differentiate a journal from a ledger and identify the types of journals and ledger.
Good day! Welcome to another interesting week of learning. By the end of our topic, you should be able to: 1. identify the uses of the two books of accounts (journal and ledger) to record business transactions, 2. illustrate the format of journals and ledgers, and 3. manifest accuracy in recording business transactions using the two books of accounts.
Let us start your Pre-test. Read and understand the following questions. Type the letter of the correct answer in the chat box.
1. Which of the following is one of the special journals? A. Sales journal B. Purchases journal C. Cash receipts journal D. Options A, B, and C
D. Options A, B, and C Sales Journal, Purchases Journal and Cash Receipts Journal
2. What transaction is recorded first in the journal? A. Most expensive entries B. Latest entries C. Earliest entries D. Cheapest entries
C. Earliest Entries
3. Which of the following is one of the activities recorded in the cash disbursements journal? A. Purchase of merchandise in cash B. Remittance of SSS Premium and other government dues C. Payments of expenses and obligations D. Options A, B, and C
D. Options A, B, and C - Purchase of merchandise in cash - Remittance of SSS Premium and other government dues - Payments of expenses and obligations
4. Which account list contains the names and numbers of all the bookkeeping accounts necessary for classifying income and expenses? A. General journal B. General ledger C. Subsidiary ledger D. Special journal
B. General ledger
5.Which refers to the name for the list of accounts used in the bookkeeping system? A. None of these are correct B. Subsidiary ledgers C. Chart of accounts D. Double-entry bookkeeping
C. Chart of Accounts
“Accounting is the process of identifying, recording, and communicating economic events of an organization to interested users.” (Weygandt et.al). From that definition, where do you think we record the transactions that we have identified? What are the tools that we use to document these transactions? How important are these records in accounting?
Companies initially record transactions and events in chronological order (the order in which they occur). Thus, the general journal is referred to as the book of srcinal entry. General journal records all transactions that do not belong in any special journals. Examples are purchases of office supplies, property and equipment on account, investment of a proprietor not involving cash, and return of merchandise bought on account. Numerology Analysis.
While the following are the special journals: Sales journal records all merchandise sold on account. An example is when goods are purchased by customers on credit. Sales invoice or receipt is the source document when recording transactions in Revenue/Sales Journal.
Cash receipts journal records all cash collections. Examples are sales of merchandise in cash and collections from customer’s accounts.
Purchases journal records all merchandise bought on account. An example is purchasing equipment on credit.
Cash disbursements journal records all cash payments. An example is the purchase of raw materials in making furniture through cash, purchase of merchandise in cash, payments of expenses and obligations, and remittance of SSS Premium and other government dues.
In recording transactions in a journal, the journal entry that was incurred the earliest should be recorded first; the credit item should be indented from the debit item and should be arranged in chronological order.
The following are observed: (1) No peso sign will be written for amounts reaching more thousands; (2) No comma will be written for amounts reaching thousands; (3) No decimal point will be written in amounts involving centavo. The following are the components of a journal entry: (1) Transaction date; (2) Titles of the accounts being debited and credited; (3) Reference number; (4) Amount of the debit and credit; and (5) Short narration of why the journal entry is being recorded.
General ledger and Subsidiary ledger Format The general ledger includes the name of the account (e.g., cash and accounts receivable), account number, date of transaction, explanation or details of the transaction, posting reference or PR (e.g., reference to the general journal or special journals), debit column, credit column, and a column for balances for other types of general ledger forms.
All journal entries must similarly post to accounts in general ledger. All you need to do is to pick the entries from the general journal and post them in the general ledger per account. Debits and credits are numbers recorded as follows: Debits are recorded on the left side of a T account in a ledger. Debits increase balances in asset accounts and expense accounts and decrease balances in liability accounts, revenue accounts, and capital accounts. Credits are recorded on the right side of a T account in a ledger.
Credits increase balances in liability accounts, revenue accounts, and capital accounts, and decrease balances in asset accounts and expense accounts. Debit accounts are asset and expense accounts that usually have debit balances, i.e., the total debits usually exceed the total credits in each debit account. Credit accounts are revenue (income, gains) accounts and liability accounts that usually have credit balances.
A subsidiary ledger is a group of similar accounts whose combined balances equal the balance in a specific general ledger account. The general ledger account that summarizes the account balance of a subsidiary ledger is called a control account or master account. For example, an accounts receivable subsidiary ledger (customers' subsidiary ledger) includes a separate account for each customer who makes credit purchases. A subsidiary ledger stores specific types of accounting transactions. See the example:
The subsidiary ledger includes the name of the account (e.g., cash and accounts receivable), the account number for a specific account with the customer’s name on it (e.g. C. Daley-AR1, B. Johnson-AR2, L. Jones-AR3), date of transaction, posting reference (e.g., reference to the general journal or special journals), debit column, credit column, and a column for balances.
general ledgers provide a complete record of financial transactions over the life of the company. It means that it is a summary of all financial transactions of a company. On the other hand, a subsidiary ledger is used as storage of specific types of accounting transactions (especially for large amounts of transactions).
Every transaction listed in the subsidiary ledger is periodically summarized and posted to an account in the general ledger (control account), which in turn is used to construct the financial statements of a company. Please take note that subsidiary ledgers are used only when there is a large amount of transaction information that would clutter up the general ledger.