The General Journal and - MCCC

1 4-1 The General Journal andthe General LedgerSection 1: The General JournalChapter4 Section transactions in the General compound Journal 2009 The McGraw-Hill Companies, Inc. All rights Accounting CycleStep 1 Analyze transactionsStep 2 Journalize the data about transactionsStep 7 Record closing entriesStep 3 Post the data about transactionsStep 4 Prepare a worksheetStep 5 Prepare financial statementsStep 6 Record adjusting entriesStep 8 Prepare a postclosing trial balanceStep 9 Interpret the financial informationStep 1 Analyze transactionsStep 2 Journalize the data about transactions4-4 A Journal is a diary of business activities. There are different types of journals. Transactions are entered in the Journal in chronological 1 Record transactions in the General journal4-5 Enter the account to be debited.

2 General JOURNALPAGE 1 DATE DESCRIPTION POST. DEBIT 6 Enter the account to be credited. Enter the amount on the same line in the Debit the amount on the same line in the Credit Taylor, Capital90, , 4-6 General JOURNALPAGE 1 DATE DESCRIPTION POST. DEBIT 6 Cash 90, Taylor, Capital 90, enter a complete but concise description of the transaction.

3 Investment by ownerWhenever possible, the Journal entry should refer to the source of the numbers are part of the audit trail., Memo 014-71. Analyze the financial a Business Transaction2. Apply the rules of debit and Make the entry in T-account Record the complete entry in General Journal form. Identify the accounts affected. Classify the accounts affected. Determine the amount of increase or decrease for each account Which account is debited? For what amount?b. Which account is credited? For what amount?4-8 General JOURNALPAGE 1 DATE DESCRIPTION POST. DEBIT 6 Cash 90, Taylor, Capital90, (Investment by owner)Cash Investment by OwnerOn November 6 Jason Taylor withdrew $90,000 from personal savings and deposited it in a new business checking account for JT s Consulting JOURNALPAGE 1 DATE DESCRIPTION POST.

4 DEBIT 7 Equipment 10, , (Purchased equip., Check 1001)Cash Purchase of EquipmentOn November 7 JT s Consulting Services issued Check 1001 for $10,000 to purchase a computer and other equipment. 4-10 Credit Purchase of EquipmentGENERAL JOURNALPAGE 1 DATE DESCRIPTION POST. DEBIT 10 Equipment 12, Payable12, Purchased equipment on account from Office Plus, Inv. 2223, due in 60 daysOn November 10, JT s Consulting Services purchased office equipment on account for $12, JOURNALPAGE 1 DATE DESCRIPTION POST.

5 DEBIT 28 Supplies 3, , (Purchased supplies, Ck. 1002)Cash Purchase of SuppliesOn November 28, JT s Consulting Services purchased supplies for $3,000, Check JOURNALPAGE 1 DATE DESCRIPTION POST. DEBIT 30 Accounts Payable 5, , Paid on account, Office Plus,Invoice 2223, Check 1003 Payment to a CreditorOn November 30 JT s Consulting Services paid Office Plus $5,000 in partial payment of Invoice 2223, Check JOURNALPAGE 1 DATE DESCRIPTION POST.

6 DEBIT 30 Prepaid Rent 7, , Paid Dec. and Jan. rent in advance; Check 1004 Recording Prepaid RentOn November 30, JT s Consulting Services wrote Check 1004 for $7,000 to prepay rent for December and performed for JOURNALPAGE 2 DATE DESCRIPTION POST. DEBIT 31 Cash 26, services for cashFees Income26, JT s Consulting performed services for $26,000 in JOURNALPAGE 2 DATE DESCRIPTION POST. DEBIT 31 Accounts Receivable9, Income9, Performed services on creditPerformed services on s Consulting performed services on account for $9, JOURNALPAGE 2 DATE DESCRIPTION POST.

7 DEBIT 31 Cash 4, Receivable 4, Received cash from credit clients on accountReceived $4,000 in cash from a credit client on Cash From Credit Clients4-17 General JOURNALPAGE 2 DATE DESCRIPTION POST. DEBIT Expense 7, , Paid monthly salaries to employees, Check 1005-1006 Paid $7,000 for Salaries4-18 General JOURNALPAGE 2 DATE DESCRIPTION POST. DEBIT 31 Utilities Expense Paid monthly bill for utilities, Check 1007 Paid Utility BillJT s consulting paid $500 in cash for a utility JOURNALPAGE 2 DATE DESCRIPTION POST.

8 DEBIT Taylor, Drawing 4, , Owner withdrew cash for personal expenses, Check 1008 Owner s WithdrawalThe owner, Jason Taylor, withdrew $4,000 from the General Journal andthe General LedgerSection 2: The General LedgerChapter4 Section Objectives3. Post Journal entries to General ledger Correct errors made in the Journal or 2009 The McGraw-Hill Companies, Inc. All rights The ledger contains a separate form for each account. The third step of the accounting cycle is posting to the ledger. 4-22 Posting is the process of transferring data from a Journal to a :QUESTION:What is posting?4-23 The Accounting CycleStep 3 Post the data about transactionsStep 1 Analyze transactionsStep 2 Journalize the data about transactionsStep 7 Record closing entriesStep 4 Prepare a worksheetStep 5 Prepare financial statementsStep 6 Record adjusting entriesStep 8 Prepare a postclosing trial balanceStep 9 Interpret the financial informationStep 3 Post the data about transactions4-24On the ledger account form shown below, notice the:ACCOUNTCASHACCOUNT NO.

9 DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT2010 Nov. 6J190, , Account name and number Columns for debit, credit, debit balance, and credit balance Columns for date, description, and posting referenceLedger Account the ledger form, enter the date of the transaction. Enter a description of the entry, if necessary. Usually, routine entries do not require the ledger form, enter the General Journal page in the Posting Reference column. the ledger form, enter the debit amount in the Debit column or the credit amount in the Credit column. the ledger form, compute the balance and enter it in the Debit Balance column or the Credit Balance column. the General Journal , enter the ledger account number in the Posting Reference column.

10 Five Steps for PostingObjective 3 Post Journal entries to General ledger accounts4-26 General JOURNALPAGE 1 DATE DESCRIPTION POST. DEBIT 7 Equipment 10, , Purchased equipment Check 1001 ACCOUNTE quipmentACCOUNT NO. DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT2010 Nov. 7J110, , Step 1: On the ledger form, enter the date of the transaction. Enter a description of the entry, if necessary. Usually, routine entries do not require 2: On the ledger form, enter the General Journal page in the Posting Reference column. The letter J refers to the General JOURNALPAGE 1 DATE DESCRIPTION POST.