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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
A journal is a diary of business activities.
There are different types of journals.
Transactions 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 JOURNAL PAGE 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 JOURNAL PAGE 1
DATE DESCRIPTION POST. DEBIT CREDIT
REF.
2007
Nov. 6 Cash 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.
Identify the accounts affected.
Classify the accounts affected.
Determine 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
checking account for JT’s Consulting Services.
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 JOURNAL PAGE 1
DATE DESCRIPTION POST. DEBIT CREDIT
REF.
2007
Nov. 6 Cash 90,000.00
Jason Taylor, Capital 90,000.00
(Investment by owner)
Cash Investment by Owner
4-23
Business Transaction
On November 7 JT’s Consulting Services issued Check
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 JOURNAL PAGE 1
DATE DESCRIPTION POST. DEBIT CREDIT
REF.
Nov. 7 Equipment 10,000.00
Cash 10,000.00
(Purchased equip., Check 1001)
Cash Purchase of Equipment
4-27
Business Transaction
On November 10 JT’s Consulting Services purchased
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 EquipmentGENERAL JOURNAL PAGE 1
DATE DESCRIPTION POST. DEBIT CREDIT
REF.
Nov. 10 Equipment 12,000.00
Accounts Payable 12,000.00
Purchased equipment on
account from Office Plus,
Inv. 2223, due in 60 daysAll required information
should be included
in the explanation.
4-31
Business TransactionOn November 28, JT’s Consulting Services
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 JOURNAL PAGE 1
DATE DESCRIPTION POST. DEBIT CREDIT
REF.
Nov. 28 Supplies 3,000.00
Cash 3,000.00
(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?
On November 30 JT’s Consulting Services paid Office
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 JOURNAL PAGE 1
DATE DESCRIPTION POST. DEBIT CREDIT
REF.
Nov. 30 Accounts Payable 5,000.00
Cash 5,000.00
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
On November 30, JT’s Consulting Services wrote
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
*Note: Both accounts affected are assets…
4-39
GENERAL JOURNAL PAGE 1
DATE DESCRIPTION POST. DEBIT CREDIT
REF.
Nov. 30 Prepaid Rent 7,000.00
Cash 7,000.00
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 JOURNAL PAGE 2
DATE DESCRIPTION POST. DEBIT CREDIT
REF.
2004
Dec. 31 Cash 26,000.00
Performed services for cash
Fees Income 26,000.00
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 earned even if
you haven’t
received the cash.
4-46
GENERAL JOURNAL PAGE 2
DATE DESCRIPTION POST. DEBIT CREDIT
REF.
Dec. 31 Accounts Receivable 9,000.00
Fees Income 9,000.00
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 JOURNAL PAGE 2
DATE DESCRIPTION POST. DEBIT CREDIT
REF.
Dec. 31 Cash 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 JOURNAL PAGE 2
DATE DESCRIPTION POST. DEBIT CREDIT
REF.
Dec. 31 Salaries Expense 7,000.00
Cash 7,000.00
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 JOURNAL PAGE 2
DATE DESCRIPTION POST. DEBIT CREDIT
REF.
Dec. 31 Utilities Expense 500.00
Cash 500.00
Paid monthly bill for utilities,
Check 1007
5. Paid $500 for a utility bill.
4-56
6. The owner withdrew $4,000 for personal expenses.
Which account is debited?
For what amount?
Which account is credited?
For what amount?
4-57
Jason Taylor, Drawing
4,000
Cash
4,000
6. The owner withdrew $4,000 for personal expenses.
4-58
GENERAL JOURNAL PAGE 2
DATE DESCRIPTION POST. DEBIT CREDIT
REF.
Dec. 31 Jason Taylor, Drawing 4,000.00
Cash 4,000.00
Owner withdrew cash for
personal expenses,
Check 1008
6. The owner withdrew $4,000 for personal expenses.
4-59
Thank Youfor using
College Accounting, 11th Edition
Price • Haddock • Brock
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