FABM 1ST SUMMATIVE

• Journal


  Chronological record of events or business transactions showing all the effects of each transaction in terms of debits and credits. It is called the book of original entry.
• Journal entry


  1. Date

  2. Account Titles and Explanation

  3. P.R. (Posting Reference)

  4. Debit

  5. Credit
• Write the month on the first transaction unless there is a change in month for the succeeding transactions or a new page is used
• Write the debit account at the extreme left of the first line while the credit account is indented half-inch on the next line
• The explanation describing the transaction is written on the extreme left of the next line below the credit
• Skip one line before proceeding to the next transaction
• Write the corresponding account number in the P.R. (Posting Reference) column once the entry is posted
• Write the debit amount under the Debit column
• Write the credit amount under the Credit column
• Account

  Form of record that summarizes the increases or decreases of any specific accounting value
• 1. Account


  The simplest form of an account because the additions and subtractions to individual accounts are visually like a big T. It is an informal tool used to analyze the effect of a transaction in the assets, liabilities, owner's equity, revenue, and expenses.
• Elements of an account

  • Account Title
  • Debit
  • Credit
• Debit


  • Increase in Asset

  2. Decrease in Liability

  3. Decrease in Owner's Equity (Withdrawals and Expenses)
• Credit


  • Decrease in Asset

  2. Increase in Liability

  3. Increase in Owner's Equity (Investment, Additional Investment, Revenue/Income)
• Ledger


  A group of the accounts used by the company. It is the book of final entry
• Account


  An accounting device or form of record that summarizes the increases or decreases of any specific accounting value
• Accounts in the general ledger

  • Statement of financial position or real accounts (assets, liabilities, and owner's equity)
  • Income statement or nominal accounts (revenue and expenses)
• 1. T - Account


  The basic format used to record every account
• Journal


  Chronologically arranged by date
• Ledger


  Organized by account
• Chart of Accounts


  A list of all account titles used by the company with their corresponding account numbers. Account titles are arranged in financial statement order
• Normal balance of an account


  • Debit (Asset, Owner's Drawing, Expense)
  • Credit (Liability, Owner's Capital, Income)
• Posting


  1. Copy date from journal to ledger

  2. Copy journal reference page number to ledger

  3. Debit amount from journal to debit column of ledger, credit amount from journal to credit column of ledger

  4. Write account number in posting reference column of journal
• Trial Balance


  A schedule of all balances to prove the equality of the debit and credit. It is a listing of all account titles with their respective debit or credit balances taken from the ledger
• The Simple and Compound Entry


  1. When only two accounts are affected, we call this a simple entry where there is only one debit account and one credit account

  2. In some cases, a transaction would require the use of three or more accounts in which case the entry is called a compound entry

  3. Either one debit and two or more credits, two or more debits and one credit or two or more debits and two or more credits