Book of Accounts - Business Transactions PDF

Review: Give the accounting equation. What is a business transaction? A business transaction is a financial transaction between two or more parties that involves the exchange of goods, money, or services. To engage in a business Barter transaction, the business exchange must be...

Review: Give the accounting equation. What is a business transaction? A business transaction is a financial transaction between two or more parties that involves the exchange of goods, money, or services. To engage in a business Barter transaction, the business exchange must be Syste m measurable in monetary value so it can be recorded for accounting purposes. Business transactions will affect the financials of the company involved. 1. Jan. 2 Mr. Rey Lacs invested P600,000 in the business and opened Relax to the Max Spa House. 2. Jan. 4 Bought P50,000 worth of furniture on account. 3. Jan. 5 Cash services rendered to walk-in clients, P15,500. 4. Jan. 8 Paid Mr. Mabahay 6-months advance for his shop rentals, P30,000. 2 600,0 600,0 investme 4 00 50,00 50,00 00 nt Income earned 5 15,00 0 0 15,00 from services 8 (30,00 0 30,00 0 0) 0 5. Jan. 10 Loaned P100,000 from Onion Bank. 6. Jan. 11 Home services rendered to Mrs. Dalisay on account, P7,500. 7. Jan. 13 Bought additional massage chair equipment on account, P35,000. 8. Jan. 15 Paid salaries of therapist employees, P22,500. 2 600,0 600,0 investme 4 00 50,00 50,00 00 nt Income earned 5 15,00 0 0 15,00 from services 8 0(30,00 30,00 0 0) 10 100,0 0 100,0 Income earned 1 00 7,500 00 7,500 from services 1 13 35,00 35,00 1 (22,50 0 0 (22,50 Salaries 5 Expense 0) 0) 9. Jan. 17 Bought aroma therapy oils, powder, face towels and cream, P8,000. 10.Jan. 18 Collected the account from Mrs. Dalisay. 11.Jan. 19 Bought record books, ballpens, staple wires and bond papers on cash, P500. 12.Jan. 21 Cash collection for services from various clients, P29,000. 2 600,0 600,0 investme 4 00 50,00 50,00 00 nt Income earned 5 15,00 0 0 15,00 from services 8 0(30,00 30,00 0 0) 10 100,0 0 100,0 Income earned 1 00 7,500 00 7,500 from services 1 13 35,00 35,00 1 (22,50 0 0 (22,50 Salaries 5 Expense 1 0) (8,000 8,000 0) 7 1 )7,500 (7,500 8 1 (500) ) 500 9 Income earned 2 29,00 29,00 from services 1 0 0 13.Jan. 23 Bought additional furniture on account, P5,000. 14.Jan. 24 Made a partial payment to Onion Bank, P10,000. 15.Jan. 26 Paid Onion Bank P1,000 for interest on loan. 16.Jan. 26 Returned P1,500 worth of defective furniture bought on account. 2 600,0 600,0 investme 4 00 50,00 50,00 00 nt Income earned 5 15,00 0 0 15,00 from services 8 0(30,00 30,00 0 0) 10 100,0 0 100,0 Income earned 1 00 7,500 00 7,500 from services 1 13 35,00 35,00 1 (22,50 0 0 (22,50 Salaries 5 Expense 1 0) (8,000 8,000 0) 7 1 )7,500 (7,500 8 1 (500) ) 500 9 Income earned 2 29,00 29,00 from services 1 2 0 5,000 5,000 0 3 2 (10,00 (10,00 4 2 0) 0) (1,000 (1,000 Interest 6 Expense 2 ) (1,500 (1,500 ) 6 ) ) 17.Collection from various clients in the amount of P25,00 for services rendered. 18.Received billing from TEI amounting to P4,500 due on the 5th of next month. 19.Paid salaries of therapist employees, P22,500. 20.Made a cash withdrawal, P55,000. 2 600,0 600,0 investme 4 00 50,00 50,00 00 nt Income earned 5 15,00 0 0 15,00 from services 8 0(30,00 30,00 0 0) 10 100,0 0 100,0 Income earned 1 00 7,500 00 7,500 from services 1 13 35,00 35,00 1 (22,50 0 0 (22,50 Salaries 5 Expense 1 0) (8,000 8,000 0) 7 1 )7,500 (7,500 8 1 (500) ) 500 9 Income earned 2 29,00 29,00 from services 1 2 0 5,000 5,000 0 3 2 (10,00 (10,00 4 2 0) 0) (1,000 (1,000 Interest 6 Expense 2 ) (1,500 (1,500 ) Income earned 6 2 25,00 ) ) 25,00 from services 72 0 4,500 (4,500 0 Utilities 8 3 (22,50 (22,50 ) Expense Salaries 0 3 0) (55,00 0) (55,00 Expense Drawing 1 627,0 0 30,00 500 0 571,0 00 0 8,000 35,00 53,50 88,50 90,00 4,500 00 754,000 0 0 0 150,300 + 0 ASSETS 571,000 754,000 /L Let’s explore: Who among you are doing this? DIARY: a record of events, transactions, or observations kept daily or at frequent intervals : journal especially : Books of Accounts  Books are essential to all of us. They are a common source of information and an integral tool for learning. In every field of study, there is a specialized book to be used. Books can also be used for documenting or recording important data, such as in the field of business, particularly in accounting. Accountants use general journal and ledger and other special journals for different business transactions. These are like books where you can find mostly financial information and records of transactions which can be used as reference in decision- making for the success of one’s business management.  Process of Accounting Recording transactions and events in chronological order is the best thing that a company can do. They are listed in the journal which is known as the “book of original entry”. It clearly shows the debit and credit effects on specific accounts in every transaction. The general journal and the special journal are the main types of accounting journal. Let’s discuss: BASIC ACCOUNTING PRINCIPLES Sir Chua’s Accounting Accounting 11 Lesson WordPress.com The general journal is the most basic journal. It is composed of spaces for dates, account titles and explanations, references, and two columns for the amount. Here are its significant contributions in the recording process. It imparts the complete effects of a transaction in one place. It presents a chronological record of transactions. It helps to avoid or notice errors in a way that the debit and the credit amounts for each entry can be easily compared.  Journalizing Process Entering transaction data in the journal is known as “journalizing”. Businesses make separate journal entries for each transaction. The Date, Account Title and Explanation, P.R., Debit and Credit. The date of the transaction is entered in the Date column. The debit account title or the account to be debited is entered at the extreme left margin of the Account Titles and Explanation column, and the amount of debit to be recorded is written in the Debit column. The credit account title or the account to be credited is entered in the next row in the column of Account Titles and Explanation. The amount of the credit is recorded in the Credit column. A short explanation of the transaction appears on the line below the credit account title (a space is left between journal entries to separate individual journal entries and to make the reading of the journal easy). The column titled P.R. known as posting reference is left blank when the journal entry is made. (This column will be used when the journal entries are transferred to the ledger accounts.) In simple entry, there are only two accounts: one debit and one credit. If the transactions require more than two accounts in journalizing, it is called the “compound entry”. All of the transactions in the example above are simple entries. Here is an example of a compound entry. Read and analyze. On October 28, 2019, Mr. Dela Rosa purchased a motorcycle which costs P110,000.00. He paid P80,000.00 cash and agreed to pay the remaining P30,000.00 within the month. The compound entry is as follows: P110,000. 00 P80,0000 P80,000. P30,000.00 00 We use different special journals and these are the following: Cash Receipts Journal This is used to record all the cash that has been received. Cash Disbursements Journal This is used to record all the transactions involving cash payments. Sales Journal This is used to record all sales on credit or on account. Purchase Journal This is used to record all purchases of inventory on credit or on account.  Cash Receipts Journal This is used to record transactions involving receipt or collection of cash. The date of the transaction is written in the date column. A brief explanation of the transaction is entered in the Description column. A column entitled P.R. for (Posting Reference) is left blank when the journal entry is made because it will be used later when the journal entries are transferred to the ledger accounts. The amount of cash received for a particular transaction is placed in the Debit Cash column, and The major categories of receipts ( cash sales and collections of account receivables ) are put in separated columns because these transactions are frequent and repetitive items. The Sundry column is used for various miscellaneous and less regular items such as capital investment and receipt loan proceeds. The Official Receipts or Cash Receipts issued by the business is the source document for this journal.  Cash Disbursements Journal (CDJ) The cash disbursements journal is the opposite of the cash receipts journal. We record all cash payments in the journal. The date of the transaction is written in the Date column. A brief explanation of the transaction is written in the Description column. The column titled P.R. known as (Posting Reference) is left blank when the journal entry is made. We will use this column later if the journal entries are transferred to the ledger accounts. When it comes to related cash payment, the check or voucher number represents the identifying number of the check issued. There were times that a check or cash voucher accompanies the disbursement. We can also use the voucher number as an alternative for this column. The amount of cash received for a particular transaction is entered in the Debit Cash column. Major categories of receipts (cash sales, and collection of accounts receivable) are provided with separate columns because these transactions are frequent and repetitive items. For various miscellaneous and less regular items (capital investment, receipt of loan proceeds), the Sundry column is used. In updating the journal, the source documents are the check voucher or cash  Sales Journal/Sales on Account Journal The Sales Journal or Sales on Account Journal is used in recording several sales transactions on account. For credit transactions with various customers or clients, the source document for this journal is the charge invoice or sales invoice. A. The date of the transaction is entered in the Date column B. A brief explanation of the transaction is entered in the description column or the name of the customer C. The column titled P.R. or (Posting Reference) is left blank when the journal entry is made. D. The Charge Invoice Number or Sales Invoice Number of sales journal represents the identifying number of the source document issued to the customer when the sale was made. E. The Debit Accounts Receivable column of sales journal represents the amount of the sale transactions indicated in the charge invoice. F. The Credit Sales column of sales journal represents the amount of the sale transactions indicated in the charge invoice. G. The source document for journal is the Charge Invoice issued by the business.  Purchase Journal/Purchases on Account Journal We usually record repeating transactions of purchases made on account through the Purchase Journal or the Purchases on Account Journal. The purchase journal’s source documents are the invoices from the supplier of the said company. The date of the transaction of JST Restaurant is entered in the Date column. A brief explanation of the transaction is entered in the description column or the name of the supplier. The column titled P.R. stands for posting reference which is left blank when the journal entry is made. The Charge Invoice Number or Sales Invoice Number represents the identifying number of the source document issued by the supplier when the items, goods or merchandise were delivered. The Debit Purchases column on the purchase journal represents the amount of the goods purchased as indicated in the charge invoice from the supplier. The Credit Accounts Payable column in the purchase journal represents the amount of the goods or items purchased on credit from the supplier. The amount is indicated in the charge invoice issued by the supplier. The charge invoice from the supplier or vendor is the source document for this journal.  There are two kinds of ledgers: the GENERAL LEDGER and the SUBSIDIARY LEDGER. The GENERAL LEDGER is grouping of all accounts used in the preparation of financial statements. The GL, as accounting professionals call it, summarizes all the activities that have taken place as recorded in its subsidiary ledger that is why it is known as the controlling account BASIC ACCOUNTING PRINCIPLES Pinteres  The format of a general ledger is shown below: BASIC ACCOUNTING PRINCIPLES Pinteres BASIC ACCOUNTING PRINCIPLES The format of a general ledger is shown below: CASH 101 2015 Jan Investment of J1 Php200,00 Php200,00 capital owner 0 0 Pinteres  Ledgers…. Simply GENERAL BASIC LEDGER PRINCIPLES ACCOUNTING because they look like letter Ts. The left side represent s the DEBIT. The right side represent  GENERAL BASIC LEDGER PRINCIPLES ACCOUNTING Three Column Ledger aziroff.com  GENERAL BASIC LEDGER PRINCIPLES ACCOUNTING  Subsidiary Ledger A subsidiary ledger is a group of similar accounts that consists of an independent data of a specific general ledger. It is officially created or maintained if individualized data is needed for a specific general ledger account. Individual record of various payables to suppliers is the best example of a subsidiary ledger. When we total the amount of all subsidiary ledgers it should equal the balance in the Accounts Payable of the general ledger. The two most common types of subsidiary ledgers are the accounts receivables ledger and accounts payable ledger.  ACCOUNTS RECEIVABLES LEDGER  Is used mainly to track the individual account balances of the company’s customers. In the illustration, the accounts receivable ledger provides the outstanding balances of customers A,B and C.  ACCOUNTS PAYABLE LEDGER  Is used mainly to track the individual accounts payable balances of the company’s creditors. In the illustration, the accounts payable ledger provides the outstanding balances of each of the creditors of the company.