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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.

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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?

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The Accounting Cycle

This section discusses the first two

steps of the accounting cycle.

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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

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Journals

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A journal is a record of original entry.

ANSWER:

QUESTION:

What is a journal?

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A journal is a diary of business activities.

There are different types of journals.

Transactions are entered in the journal in

chronological order.

Journal

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Chronological order is the order in

which events occur.

ANSWER:

QUESTION:

What is chronological order?

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The General Journal

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Objective 1

Record transactions in the

general journal.

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A general journal is a financial record for

entering all types of business

transactions.

ANSWER:

QUESTION:

What is a general journal?

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Journalizing is the process of recording

transactions in a journal.

ANSWER:

QUESTION:

What is journalizing?

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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

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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

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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?

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Recording November Transactions in the General Journal

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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?

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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.

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Cash Investment by Owner

Which account is debited?

For what amount?

Which account is credited?

For what amount?

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Cash

(a) 90,000

Jason Taylor, Capital

(b) 90,000

Cash Investment by Owner

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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

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Business Transaction

On November 7 JT’s Consulting Services issued Check

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

equipment.

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Cash Purchase of Equipment

Which account is debited?

For what amount?

Which account is credited?

For what amount?

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Equipment

(c) 10,000

Cash

(d) 10,000

Cash Purchase of Equipment

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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

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Business Transaction

On November 10 JT’s Consulting Services purchased

office equipment on account for $12,000.

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Credit Purchase of Equipment

Which account is debited?

For what amount?

Which account is credited?

For what amount?

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Credit Purchase of Equipment

Equipment

(e) 12,000

Accounts Payable

(f) 12,000

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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.

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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?

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Cash Purchase of Supplies

Supplies

(g) 3,000

Cash

(h) 3,000

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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

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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.

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Payment to a Creditor

Accounts Payable

(j) 5,000

Cash

(i) 5,000

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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

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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.

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Recording Prepaid Rent

Prepaid Rent

(k) 7,000

Cash

(l) 7,000

*Note: Both accounts affected are assets…

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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

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Recording December Transactions in the General Journal

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Which account is debited?

For what amount?

Which account is credited?

For what amount?

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

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Cash

26,000

Fees Income

26,000

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

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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

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

Which account is debited?

For what amount?

Which account is credited?

For what amount?

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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.

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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.

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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?

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Cash

4,000

Accounts Receivable

4,000

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

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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.

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4. Paid $7,000 for salaries.

Which account is debited?

For what amount?

Which account is credited?

For what amount?

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4. Paid $7,000 for salaries.

Salaries Expense

7,000

Cash

7,000

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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.

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5. Paid $500 for a utility bill.

Which account is debited?

For what amount?

Which account is credited?

For what amount?

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5. Paid $500 for a utility bill.

Utilities Expense

500

Cash

500

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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.

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6. The owner withdrew $4,000 for personal expenses.

Which account is debited?

For what amount?

Which account is credited?

For what amount?

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Jason Taylor, Drawing

4,000

Cash

4,000

6. The owner withdrew $4,000 for personal expenses.

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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.

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Thank Youfor using

College Accounting, 11th Edition

Price • Haddock • Brock