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Recording Transactions in a General Journal

Chapter 6. $. Recording Transactions in a General Journal. $. Making Accounting Relevant Some people keep journals to keep track of their daily activities. $. $. What do you think a business journal is used for? What would be contained in that journal?. Chapter 5. $.

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Recording Transactions in a General Journal

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  1. Chapter 6 $ Recording Transactions in a General Journal $ Making Accounting Relevant Some people keep journals to keep track of their daily activities. $ $ What do you think a business journal is used for? What would be contained in that journal?

  2. Chapter 5 $ Section 1 The Accounting Cycle • Students will be able to: • Explain the first three steps in the accounting cycle. • Explain why is it necessary to journalize transactions. • Name and describe several examples of source documents. • Apply information from the different kinds of source documents used in a business. $ $ $

  3. Chapter 5 $ Section 1 The Accounting Cycle • Students will be able to: • Define the accounting terms related to journalizing transactions in a journal. • Explain the difference between a calendar year and a fiscal year. • Describe the steps to make a general journal entry • Make general journal entries and correct errors in journal entries. $ $ $

  4. Chapter 5 • On October 1 Maria Sanchez took $25,000 from personal savings and deposited that amount to open a business checking account in the name of Roadrunner Delivery Service, Memorandum 1. $ $ Chapter 3 The Accounting Equation: Assets = Liabilities + Owner’s Equity 25,000 = 25,000 Cash in Bank Maria Sanchez, Capital Chapter 4 T-Accounts: Cash in Bank Maria Sanchez, Capital 25,000 25,000 Debit Credit Debit Credit + - - + $ $

  5. CHAPTER 5 $ Recording Transactions in the General Journal $ Business Transaction 1 (con’t.) On October 1 Maria Sanchez took $25,000 from personal savings and deposited that amount to open a business checking account in the name of Roadrunner Delivery Service, Memorandum 1. $ JOURNAL ENTRY7. $

  6. Section 1 The Accounting Cycle (con’t.) Chapter 5 $ The Steps of the Accounting Cycle $ $ $

  7. Section 1 The Accounting Cycle (con’t.) $ The First Step in the Accounting Cycle: Collecting and Verifying Source Documents $ • The accounting cycle starts by collecting and verifying the accuracy of source documents. • Source document is a paper prepared as evidence of that transaction. $ $

  8. Section 1 The Accounting Cycle (con’t.) $ The First Step in the Accounting Cycle: Collecting and Verifying Source Documents (con’t.) $ Invoice: Lists specific information about a business transaction involving the buying or selling of an item. The invoice contains the date of the transaction, along with the quantity, description, and cost of each item. $ $

  9. Section 1 The Accounting Cycle (con’t.) $ The First Step in the Accounting Cycle: Collecting and Verifying Source Documents (con’t.) $ Receipt: A record of cash received by a business. It indicates the date the payment was received, the name of the person or business from whom the payment was received, and the amount of the payment. $ $

  10. Section 1 The Accounting Cycle (con’t.) $ The First Step in the Accounting Cycle: Collecting and Verifying Source Documents (con’t.) $ Memorandum: A brief written message that describes a transaction that takes place within a business. Often used if no other source document exists for the business transaction. $ $

  11. Section 1 The Accounting Cycle (con’t.) $ The First Step in the Accounting Cycle: Collecting and Verifying Source Documents (con’t.) $ Check Stub: The check stub lists the same information that appears on a check: the date written, the person or business to whom the check was written, and the amount of the check. The check stub also shows the balance in the checking account before and after each check is written. $ $

  12. Section 1 The Accounting Cycle (con’t.) $ The Second Step in the Accounting Cycle: Analyzing Business Transactions $ • Analyzing information on the source documents to determine the debit and credit parts of each transaction. $ $

  13. Section 1 The Accounting Cycle (con’t.) $ The Third Step in the Accounting Cycle: Recording Business Transactions in a Journal $ • Record the debit and credit parts of each business transaction in a journal. • A journal is a record of all of the transactions of a business. • The process of recording business transactions in a journal is called journalizing. $ $

  14. Chapter 5 $ Section 2Recording Transactions in the General Journal • Students will be able to: • Define the accounting terms related to journalizing transactions in a journal. • Explain why is it necessary to journalize transactions. • Describe the steps to make a general journal entry • Make general journal entries and correct errors in journal entries. $ $ $

  15. Chapter 5 $ Section 2Recording Transactions in the General Journal • Enduring Understanding: • The general journal is used to summarize and record all detail daily transactions of a business. • Essential Questions • How does a general journal organize and reflect the value of your business? $ $ $

  16. Section 2 Recording Transactions in the General Journal (con’t.) $ Recording a General Journal Entry (con’t.) $ Business Transaction (con’t.) BUSINESS TRANSACTION ANALYSIS (con’t.) $ DEBIT-CREDIT RULE4. Which account is debited? For what amount? 5. Which account is credited? For what amount? $

  17. Section 2 Recording Transactions in the General Journal (con’t.) $ Recording a General Journal Entry (con’t.) $ Business Transaction (con’t.) BUSINESS TRANSACTION ANALYSIS (con’t.) $ T ACCOUNTS6. What is the complete entry in T-account form? $

  18. Section 2 Recording Transactions in the General Journal (con’t.) $ Recording a General Journal Entry (con’t.) $ Business Transaction (con’t.) BUSINESS TRANSACTION ANALYSIS (con’t.) $ JOURNAL ENTRY7. What is the complete entry in general journal form? $

  19. Section 2 Recording Transactions in the General Journal (con’t.) $ Business Transaction 1 On October 1 Maria Sanchez took $25,000 from personal savings and deposited that amount to open a business checking account in the name of Roadrunner Delivery Service, Memorandum 1. $ $ ANALYSISIdentify 1. The accounts Cash in Bank and Maria Sanchez, Capital are affected. Classify 2.Cash in Bank is an asset account. Maria Sanchez, Capital is an owner’s capital account. + / – 3.Cash in Bank is increased by $25,000. Maria Sanchez, Capital is increased by $25,000. $

  20. Section 2 Recording Transactions in the General Journal (con’t.) $ Recording a General Journal Entry (con’t.) Business Transaction 1 (con’t.) $ On October 1 Maria Sanchez took $25,000 from personal savings and deposited that amount to open a business checking account in the name of Roadrunner Delivery Service, Memorandum 1. $ DEBIT-CREDIT RULE4. Increases in asset accounts are recorded as debits. Debit Cash in Bank for $25,000. 5. Increases in owner’s capital account are recorded as credits. Credit Maria Sanchez, Capital for $25,000. $

  21. Section 2 Recording Transactions in the General Journal (con’t.) $ Recording a General Journal Entry (con’t.) $ Business Transaction 1 (con’t.) On October 1 Maria Sanchez took $25,000 from personal savings and deposited that amount to open a business checking account in the name of Roadrunner Delivery Service, Memorandum 1. $ Maria Sanchez, Cash in Bank Capital T ACCOUNTS6. Debit + 25,000 Credit – Debit – Credit + 25,000 $

  22. Section 2 Recording Transactions in the General Journal (con’t.) $ Recording a General Journal Entry (con’t.) $ Business Transaction 1 (con’t.) On October 1 Maria Sanchez took $25,000 from personal savings and deposited that amount to open a business checking account in the name of Roadrunner Delivery Service, Memorandum 1. $ JOURNAL ENTRY7. $

  23. Section 2 Recording Transactions in the General Journal (con’t.) $ Business Transaction 4 On October 9 Roadrunner bought a used truck on account from North Shore Auto for $12,000, Invoice 200. $ ANALYSISIdentify 1. The accounts Delivery Equipment and Accounts Payable—North Shore Auto are affected. Classify 2.Delivery Equipment is an asset account. Accounts Payable— North Shore Auto is a liability account. + / – 3.Delivery Equipment is increased by $12,000. Accounts Payable— North Shore Auto is increased by $12,000. $ $

  24. Section 2 Recording Transactions in the General Journal (con’t.) $ Recording a General Journal Entry (con’t.) Business Transaction 4 (con’t.) $ On October 9 Roadrunner bought a used truck on account from North Shore Auto for $12,000, Invoice 200. $ DEBIT-CREDIT RULE4. Increases in asset accounts are recorded as debits. Debit Delivery Equipment for $12,000. 5. Increases in liability accounts are recorded as credits. Credit Accounts Payable—North Shore Auto for $12,000. $

  25. Section 2 Recording Transactions in the General Journal (con’t.) $ Recording a General Journal Entry (con’t.) $ Business Transaction 4 (con’t.) On October 9 Roadrunner bought a used truck on account from North Shore Auto for $12,000, Invoice 200. $ T ACCOUNTS6. Delivery Accounts Payable— Equipment North Shore Auto Credit – Debit – Debit + 12,000 Credit + 12,000 $

  26. Section 2 Recording Transactions in the General Journal (con’t.) $ Recording a General Journal Entry (con’t.) $ Business Transaction 1 (con’t.) On October 9 Roadrunner bought a used truck on account from North Shore Auto for $12,000, Invoice 200. $ JOURNAL ENTRY7. $

  27. Section 2 Recording Transactions in the General Journal (con’t.) $ Correcting Errors in General Journal Entries • An error should never be erased. • Use a pen and a ruler to draw a horizontal line through the entire incorrect item and write the correct information above the crossed-out error. $ $ $

  28. Section 2 Recording Transactions in the General Journal (con’t.) $ Check Your Understanding $ 1. What accounts would you use to record the purchase of a newspaper ad for cash? 2. What accounts would you use to record the sale of business services on account? $ $

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