Recording Transactions in a General Journal

1 4. Recording Transactions in a General Journal AFTER STUDYING CHAPTER 4, YOU WILL BE ABLE TO: 1. Define accounting terms related to journalizing Transactions . 2. Identify accounting concepts and practices related to jounal- izing Transactions . 3. Record in a General Journal Transactions to set up a business. 4. Record in a General Journal Transactions to buy insurance for cash and supplies on account. 5. Record in a General Journal Transactions that affect owner's equity and receiving cash on account. 6. Start a new Journal page.

2 TERMS PREVIEW. Journal JOURNALS AND JOURNALIZING. journalizing As described in Chapter 3, Transactions are analyzed into debit and credit parts before information is recorded. A form for Recording transac- entry tions in chronological order is called a Journal . Recording Transactions in General Journal a Journal is called journalizing. Transactions could be recorded in the accounting equation. However, double-entry most companies wish to create a more permanent record by Recording accounting Transactions in a Journal . source document Each business uses the kind of Journal that best fits the needs of that business.

3 The nature of a business and the number of Transactions to be check recorded determine the kind of Journal to be used. invoice The word Journal comes from the Latin diurnalis, meaning daily. Most businesses conduct Transactions every day. To keep from getting over- sales invoice loaded, the businesses will make entries in their accounting journals receipt every day. memorandum The Small Business Administration (SBA). F has programs that offer free management and accounting advice to small business Y owners. The SBA sponsors various workshops and publishes a variety of booklets for small I business owners.

4 64. AC C O U N T I N G. AREER. IN YOUR C. DARDS FOR. HIGH STAN G. IN. JOURNALIZ for d ra H u ffm an has worked San days as ar ques a A dvertising for 30. M on for clerk, a positi an accounting ona m p an y owner, Ram d files which th e co h e jo u rn al iz es all u tg o in g m ai l, prepares an ed her. S ming and o Marquesa, hir d ay , h andles all inco about 50 p er assigned. amona, who Transactions , p er fo rm s other duties as th e Journal to R. m en ts , an d d ra h an d ed what all source docu k ed to se e th e Journal . San d ra d id n 't know exactly One day Ram ona as her chair.

5 San ions as w h ile S an d ra fidgeted in w ith jo u rn al izing transact scanned a few pages ood a job ew sh e h ad not done as g she k n You have to expect, but is jou rnal, Sandra. ou t th she should hav e. ncerned ab now if the en sig h ed an d said, I'm co m er ou s er as ures. I don't k Ramona th d I notice n u for $20,000. sa ct io n s in pencil, an at th is o ne transaction recorded al l tran away th order. ed it s, b u t I can see right sin g an d so me are out of e cr dates are m is debits equal th ,000 . Some of the ee n fo r $2 around?

6 Her should have b e d o to tu rn this situation h er th e ch ance to improve suggest w a for giving rity it What do you S an d ra thanked Ramon in g th e jo urnal the prio g , g iv After apologiz in ad not been the future. ed th at sh e realized she h p ro v e h er p erformance in lain would im work. She exp to d es cribe how she w en t o n required and she knows it is Thin k in g : jour nal to demonstrate that Critical e ld say about th t do yo u thin k Sandra shou 1. Wha ould make? important? en ts do you think Sandra sh ific improvem 2.

7 What spec CHAPTER 4 Recording Transactions in a General Journal 65. Journals, Source Documents, and 4-1 Recording Entries in a Journal A General Journal . General Journal PAGE. DATE ACCOUNT TITLE DOC. POST. DEBIT CREDIT. NO. REF. 1 1. 2 2. 3 3. 4 4. 5 5. 6 6. 7 7. 8 8. 9 9. Using a Journal In double-entry accounting, each transaction Information for each transaction recorded in affects at least two accounts. Both the debit part a Journal is called an entry. A Journal with two and the credit part are recorded for each transac- amount columns in which all kinds of entries tion.

8 This procedure reflects the dual effect of can be recorded is called a General Journal . each transaction on the business's records. Encore Music uses a General Journal . Double-entry accounting assures that debits The columns in Encore Music's General equal credits. Journal are Date, Account Title, Doc. No., Post. Ref., Debit, and Credit. The use of each column Source Documents is described later in this chapter. A business paper from which information is obtained for a Journal entry is called a Accuracy source document. Each transaction is described Information recorded in a Journal includes by a source document that proves that the trans- the debit and credit parts of each transaction action did occur.

9 For example, Encore Music pre- recorded in one place. The information can be pares a check stub for each cash payment made. verified by comparing the data in the Journal The check stub describes information about the with the transaction data to assure that all infor- cash payment transaction for which the check is mation is correct. prepared. The accounting concept, Objective Evidence, is applied when a source document is Chronological Record prepared for each transaction. (CONCEPT: Transactions are recorded in a Journal by Objective Evidence).

10 Date in the order in which the Transactions occur. A transaction should be journalized only if it All information about each transaction is record- actually occurs. The amounts recorded must be ed in one place, making the information for a accurate and true. Nearly all Transactions result specific transaction easy to locate. in the preparation of a source document. Encore Music uses five source documents: checks, sales Double-Entry Accounting invoices, receipts, calculator tapes, and The Recording of debit and credit parts of a memorandums.