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4-1

The General Journal and

the General Ledger

Section 1: The General Journal

Chapter

4

Section Objectives

1.Record transactions in the

general journal.

2.Prepare compound journal

entries. McGraw-Hill© 2007 The McGraw-Hill Companies, Inc. All rights reserved. 4-3

The accounting cycle is a series of steps

performed during each accounting period to classify, record, and summarize data for a business and to produce needed financial information.

ANSWER:

QUESTION:

What is the accounting cycle?

4-4

The Accounting Cycle

This section discusses the first two

steps of the accounting cycle. 4-5

The Accounting Cycle

Step 1

Analyze

transactions

Step 2

Journalize the

data about transactions

Step 7

Record

closing entries

Step 3

Post the

data about transactions

Step 4

Prepare

a worksheet

Step 5

Prepare

financial statements

Step 6

Record

adjusting entriesStep 8

Prepare a

postclosing trial balance

Step 9

Interpret

the financial information

Step 1

Analyze

transactions

Step 2

Journalize the

data about transactions 4-6

Journals

4-7

A journal is a record of original entry.

ANSWER:

QUESTION:

What is a journal?

4-8

YA journal is a diary of business activities.

YThere are different types of journals.

YTransactions are entered in the journal in

chronological order.

Journal

4-9

Chronological order is the order in

which events occur.

ANSWER:

QUESTION:

What is chronological order?

4-10

The General Journal

4-11

Objective 1

Record transactions in the

general journal. 4-12

A general journal is a financial record for

entering all types of business transactions.

ANSWER:

QUESTION:

What is a general journal?

4-13

Journalizing is the process of recording

transactions in a journal.

ANSWER:

QUESTION:

What is journalizing?

4-14

Enter the account to be debited.

GENERAL JOURNALPAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF. 2007

Nov. 6

Enter the account to be credited.

Enter the amount on the same line in the Debit column. Enter the amount on the same line in the Credit column. Cash

Jason Taylor, Capital

90,000.00

90,000.00

4-15

GENERAL JOURNALPAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF. 2007

Nov. 6Cash 90,000.00

Jason Taylor, Capital 90,000.00

Then enter a complete but concise description of the transaction.

Investment by owner

Whenever possible, the journal entry should refer to the source of the information.

Document numbers are part of the audit trail.

, Memo 01 4-16

An audit trail is a chain of references

that makes it possible to trace information, locate errors, and prevent fraud.

ANSWER:

QUESTION:

What is an audit trail?

4-17

Recording November Transactions

in the General Journal 4-18

1. Analyze the financial event.

Recording a

Business Transaction

2. Apply the rules of debit and credit.

3. Make the entry in T-account form.

4. Record the complete entry in general journal form.

YIdentify the accounts affected.

YClassify the accounts affected.

YDetermine the amount of increase or decrease for each account affected. a. Which account is debited? For what amount? b. Which account is credited? For what amount? 4-19

Business Transaction

On November 6 Jason Taylor withdrew $90,000 from

personal savings and deposited it in a new business 4-20

Cash Investment by Owner

Which account is debited?

For what amount?

Which account is credited?

For what amount?

4-21 Cash (a) 90,000

Jason Taylor, Capital

(b) 90,000

Cash Investment by Owner

4-22

GENERAL JOURNALPAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF. 2007
Nov. 6Cash 90,000.00

Jason Taylor, Capital90,000.00

(Investment by owner)

Cash Investment by Owner

4-23

Business Transaction

1001 for $10,000 to purchase a computer and other

equipment. 4-24

Cash Purchase of Equipment

Which account is debited?

For what amount?

Which account is credited?

For what amount?

4-25

Equipment

(c) 10,000 Cash (d) 10,000

Cash Purchase of Equipment

4-26

GENERAL JOURNALPAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF. Nov. 7Equipment 10,000.00

Cash10,000.00

(Purchased equip., Check 1001)

Cash Purchase of Equipment

4-27

Business Transaction

office equipment on account for $12,000. 4-28

Credit Purchase of Equipment

Which account is debited?

For what amount?

Which account is credited?

For what amount?

4-29

Credit Purchase of Equipment

Equipment

(e) 12,000

Accounts Payable

(f) 12,000 4-30

Credit Purchase of Equipment

GENERAL JOURNALPAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF. Nov. 10Equipment 12,000.00

Accounts Payable12,000.00

Purchased equipment on

account from Office Plus,

Inv. 2223, due in 60 daysAll required information

should be included in the explanation. 4-31

Business Transaction

purchased supplies for $3,000, Check 1002. Which account is debited?Which account is credited?

For what amount?For what amount?

4-32

Cash Purchase of Supplies

Supplies

(g) 3,000 Cash (h) 3,000 4-33

GENERAL JOURNALPAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF. Nov. 28Supplies 3,000.00

Cash3,000.00

(Purchased supplies, Ck. 1002)

Cash Purchase of Supplies

4-34

Business Transaction

Which account is debited?

For what amount?

Which account is credited?

For what amount?

Plus $5,000 in partial payment of Invoice 2223, Check 1003.
4-35

Payment to a Creditor

Accounts Payable

(j) 5,000 Cash (i) 5,000 4-36

GENERAL JOURNALPAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF. Nov. 30Accounts Payable 5,000.00

Cash5,000.00

Paid on account, Office Plus,

Invoice 2223, Check 1003

Payment to a Creditor

4-37

Which account is debited?

For what amount?

Which account is credited?

For what amount?

Business Transaction

Check 1004 for $7,000 to prepay rent for December and

January.

4-38

Recording Prepaid Rent

Prepaid Rent

(k) 7,000 Cash (l) 7,000

1RPH %RPO MŃŃRXQPV MIIHŃPHG MUH MVVHPV"

4-39

GENERAL JOURNALPAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF. Nov. 30Prepaid Rent 7,000.00

Cash7,000.00

Paid Dec. and Jan. rent

in advance; Check 1004

Recording Prepaid Rent

4-40

Recording December

Transactions

in the General Journal 4-41

Which account is debited?

For what amount?

Which account is credited?

For what amount?

1. Performed services for $26,000 in cash.

4-42 Cash

26,000

Fees Income

26,000

1. Performed services for $26,000 in cash.

4-43

1. Performed services for $26,000 in cash.

GENERAL JOURNALPAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF. 2004
Dec. 31Cash 26,000.00

Performed services for cash

Fees Income26,000.00

4-44

2. Performed services for $9,000 on credit.

Which account is debited?

For what amount?

Which account is credited?

For what amount?

4-45

Accounts Receivable

9,000

Fees Income

9,000

2. Performed services for $9,000 on credit.

Record the revenue

as earnedeven if \RX OMYHQ·P received the cash. 4-46

GENERAL JOURNALPAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

Dec. 31Accounts Receivable9,000.00

Fees Income9,000.00

Performed services on credit

2. Performed services for $9,000 on credit.

4-47

3. Received $4,000 in cash from credit clients on

their accounts.

Which account is debited?

For what amount?

Which account is credited?

For what amount?

4-48 Cash 4,000

Accounts Receivable

4,000

3. Received $4,000 in cash from credit clients on

their accounts. 4-49

GENERAL JOURNALPAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF. Dec. 31Cash 4,000.00

Accounts Receivable 4,000.00

Received cash from credit

clients on account

3. Received $4,000 in cash from credit clients on

their accounts. 4-50

4. Paid $7,000 for salaries.

Which account is debited?

For what amount?

Which account is credited?

For what amount?

4-51

4. Paid $7,000 for salaries.

Salaries Expense

7,000 Cash 7,000 4-52

GENERAL JOURNALPAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF. Dec.31Salaries Expense 7,000.00

Cash7,000.00

Paid monthly salaries to

employees, Check 1005-1006

4. Paid $7,000 for salaries.

4-53

5. Paid $500 for a utility bill.

Which account is debited?

For what amount?

Which account is credited?

For what amount?

4-54

5. Paid $500 for a utility bill.

Utilities Expense

500
Cash 500
4-55

GENERAL JOURNALPAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

Dec. 31Utilities Expense 500.00

Cash500.00

Paid monthly bill for utilities,

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