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The General Journal and the General Ledger

Chapter. 4. The General Journal and the General Ledger. Section 1: The General Journal. Section Objectives. Record transactions in the general journal. Prepare compound journal entries. QUESTION:. What is the accounting cycle?. ANSWER:.

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The General Journal and the General Ledger

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  1. Chapter 4 The General Journal andthe General Ledger Section 1: The General Journal Section Objectives • Record transactions in the general journal. • Prepare compound journal entries.

  2. QUESTION: What is the accounting cycle? ANSWER: 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.

  3. The Accounting Cycle This section discusses the first two steps of the accounting cycle.

  4. The Accounting Cycle Step 2 Journalize the data about transactions Step 2Journalize the data about transactions Step 3Post the data about transactions Step 4 Prepare a worksheet Step 1 Analyze transactions Step 1Analyze transactions Step 5Prepare financial statements Step 9Interpret the financial information Step 6Record adjusting entries Step 7Record closing entries Step 8Prepare a postclosing trial balance

  5. Journals

  6. QUESTION: What is a journal? ANSWER: A journal is a record of original entry.

  7. Journal • A journal is a diary of business activities. • There are different types of journals. • Transactions are entered in the journal in chronological order.

  8. QUESTION: What is chronological order? ANSWER: Chronological order is the order in which events occur.

  9. The General Journal

  10. Objective 1 Record transactions in the general journal.

  11. QUESTION: What is a general journal? ANSWER: A general journal is a financial record for entering all types of business transactions.

  12. QUESTION: What is journalizing? ANSWER: Journalizing is the process of recording transactions in a journal.

  13. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. 2007 Nov. 6 Cash 90,000.00 90,000.00 Jason Taylor, Capital Enter the account to be debited. Enter the amount on the same line in the Debit column. Enter the account to be credited. Enter the amount on the same line in the Credit column.

  14. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. , Memo 01 Investment by owner 2007 Nov. 6 Cash 90,000.00 Jason Taylor, Capital 90,000.00 Then enter a complete but concise description of the transaction. Whenever possible, the journal entry should refer to the source of the information. Document numbers are part of the audit trail.

  15. QUESTION: What is an audit trail? ANSWER: An audit trail is a chain of references that makes it possible to trace information, locate errors, and prevent fraud.

  16. Recording November Transactions in the General Journal

  17. Recording a Business Transaction 1. Analyze the financial event. • Identify the accounts affected. • Classify the accounts affected. • Determine the amount of increase or decrease for each account affected. 2. Apply the rules of debit and credit. a. Which account is debited? For what amount? b. Which account is credited? For what amount? 3. Make the entry in T-account form. 4. Record the complete entry in general journal form.

  18. 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.

  19. Cash Investment by Owner Which account is credited? Which account is debited? For what amount? For what amount?

  20. (b) 90,000 Cash Investment by Owner Cash Jason Taylor, Capital (a) 90,000

  21. Cash Investment by Owner 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)

  22. Business Transaction On November 7 JT’s Consulting Services issued Check 1001 for $10,000 to purchase a computer and other equipment.

  23. Cash Purchase of Equipment Which account is credited? Which account is debited? For what amount? For what amount?

  24. (d) 10,000 Cash Purchase of Equipment Equipment Cash (c) 10,000

  25. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. Nov. 7 Cash Purchase of Equipment Equipment 10,000.00 Cash 10,000.00 (Purchased equip., Check 1001)

  26. Business Transaction On November 10 JT’s Consulting Services purchased office equipment on account for $12,000.

  27. Credit Purchase of Equipment Which account is credited? Which account is debited? For what amount? For what amount?

  28. (f) 12,000 Credit Purchase of Equipment Equipment Accounts Payable (e) 12,000

  29. Credit Purchase of Equipment GENERAL 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 days All required information should be included in the explanation.

  30. Business Transaction On 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?

  31. (h) 3,000 Cash Purchase of Supplies Supplies Cash (g) 3,000

  32. Cash Purchase of Supplies GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. Nov. 28 Supplies 3,000.00 Cash 3,000.00 (Purchased supplies, Ck. 1002)

  33. Business Transaction On November 30 JT’s Consulting Services paid Office Plus $5,000 in partial payment of Invoice 2223, Check 1003. Which account is debited? Which account is credited? For what amount? For what amount?

  34. (i) 5,000 Payment to a Creditor Accounts Payable Cash (j) 5,000

  35. Payment to a Creditor 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

  36. Business Transaction On November 30, JT’s Consulting Services wrote Check 1004 for $7,000 to prepay rent for December and January. Which account is debited? Which account is credited? For what amount? For what amount?

  37. (l) 7,000 Recording Prepaid Rent Prepaid Rent Cash (k) 7,000 *Note: Both accounts affected are assets…

  38. Recording Prepaid Rent 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

  39. Recording December Transactions in the General Journal

  40. 1. Performed services for $26,000 in cash. Which account is debited? Which account is credited? For what amount? For what amount?

  41. 26,000 1. Performed services for $26,000 in cash. Cash Fees Income 26,000

  42. GENERAL JOURNAL PAGE 2 DATE DESCRIPTION POST. DEBIT CREDIT REF. 2004 Dec. 31 1. Performed services for $26,000 in cash. Cash 26,000.00 Fees Income 26,000.00 Performed services for cash

  43. 2. Performed services for $9,000 on credit. Which account is credited? Which account is debited? For what amount? For what amount?

  44. 9,000 2. Performed services for $9,000 on credit. Accounts Receivable Fees Income 9,000 Record the revenue as earned even if you haven’t received the cash.

  45. GENERAL JOURNAL PAGE 2 DATE DESCRIPTION POST. DEBIT CREDIT REF. Dec. 31 2. Performed services for $9,000 on credit. Accounts Receivable 9,000.00 Fees Income 9,000.00 Performed services on credit

  46. 3. Received $4,000 in cash from credit clients on their accounts. Which account is credited? Which account is debited? For what amount? For what amount?

  47. 4,000 3. Received $4,000 in cash from credit clients on their accounts. Cash Accounts Receivable 4,000

  48. GENERAL JOURNAL PAGE 2 DATE DESCRIPTION POST. DEBIT CREDIT REF. Dec. 31 3. Received $4,000 in cash from credit clients on their accounts. Cash 4,000.00 Accounts Receivable 4,000.00 Received cash from credit clients on account

  49. 4. Paid $7,000 for salaries. Which account is credited? Which account is debited? For what amount? For what amount?

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