FABM LESSON 8

• What are the two major types of books of accounts?

  Journal and Ledger
• Why is the journal referred to as the book of original entry?

  It records transactions in chronological order
• What does the journal show for each transaction?

  Debit and credit effects on accounts
• What are the key components of a journal entry?

  • Date of the transaction
  • Debit account title
  • Credit account title
  • Brief explanation of the transaction
  • Reference column (left blank initially)
• What is the general journal?

  The most basic journal for recording transactions
• What are the significant contributions of the general journal?

  It discloses transaction effects and prevents errors
• What types of transactions are recorded in a General Journal?

  Opening, closing, transfer, and adjusting entries
• What is the process of journalizing?

  Entering transaction data in the journal
• What is a compound entry?

  An entry that requires three or more accounts
• What is the purpose of special journals?

  To efficiently record similar and recurring transactions
• What are the commonly used special journals?

  • Cash Receipts Journal
  • Cash Disbursements Journal
  • Sales Journal
  • Purchase Journal
• What is recorded in the Cash Receipts Journal?

  All cash that has been received
• What is the source document for the Cash Receipts Journal?

  Official Receipts or Cash Receipts
• What is the purpose of the Cash Disbursements Journal?

  To record all cash payments
• What is the source document for the Sales Journal?

  Charge invoice or sales invoice
• What does the Purchase Journal record?

  Recurring transactions of purchases on account
• What is the ledger in accounting?

  • An accounting book for posting accounts
  • Called the 'book of final entry'
  • Used for preparing financial statements
• What is the general ledger?

  A grouping of all accounts for financial statements
• What does the Balance Column in a ledger represent?

  The running balance of the account
• What is a subsidiary ledger?

  A group of like accounts with independent data
• What should the total running balance of subsidiary ledgers equal?

  The balance in the Accounts Payable general ledger
• What are the components of a subsidiary ledger?

  • Name and address of the vendor
  • Vendor number for reference
  • Date of the transaction
  • Description of the transaction
  • Reference from the journal
  • Debit and Credit columns for transactions
  • Balance column for running balance