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Section 2 Recording Transactions in the General Journal

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  1. Chapter 6 Section 2 Recording Transactions in the General Journal $ $ • What You’ll Learn • The purpose of a general journal. • The parts and labeling of a general journal. • How information is entered in a general journal. • How to correct errors in a general journal. $ $

  2. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ Why It’s Important The general journal is a permanent record of the financial transactions of a business. $ $ • Key Terms • general journal $

  3. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ Recording a General Journal Entry The general journalis an all purpose journal in which all the transactions of a business may be recorded. $ 1Date of the transaction 2Name of the account debited 3Amount of the debit $ $ 4Name of the account credited 6 Source document reference or an explanation 5Amount of the credit

  4. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ Recording a General Journal Entry (cont'd.) $ Business Transaction BUSINESS TRANSACTION ANALYSIS $ ANALYSISIdentify 1. Identify the accounts affected. Classify 2. Classify the accounts affected. + / – 3. Determine the amount of the increase or decrease for each account affected. $

  5. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ Recording a General Journal Entry (cont'd.) $ Business Transaction (cont'd.) BUSINESS TRANSACTION ANALYSIS (cont'd.) $ DEBIT-CREDIT RULE4. Which account is debited? For what amount? 5. Which account is credited? For what amount? $

  6. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ Recording a General Journal Entry (cont'd.) $ Business Transaction (cont'd.) BUSINESS TRANSACTION ANALYSIS (cont'd.) $ T ACCOUNTS6. What is the complete entry in T-account form? $

  7. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ Recording a General Journal Entry (cont'd.) $ Business Transaction (cont'd.) BUSINESS TRANSACTION ANALYSIS (cont'd.) $ JOURNAL ENTRY7. What is the complete entry in general journal form? $

  8. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ 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. $

  9. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ Recording a General Journal Entry (cont'd.) Business Transaction 1 (cont'd.) $ 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. $

  10. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ Recording a General Journal Entry (cont'd.) $ Business Transaction 1 (cont'd.) 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 $

  11. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ Recording a General Journal Entry (cont'd.) $ Business Transaction 1 (cont'd.) 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. $

  12. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ 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. $ $

  13. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ Recording a General Journal Entry (cont'd.) Business Transaction 4 (cont'd.) $ 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. $

  14. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ Recording a General Journal Entry (cont'd.) $ Business Transaction 4 (cont'd.) 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 $

  15. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ Recording a General Journal Entry (cont'd.) $ Business Transaction 1 (cont'd.) On October 9, Roadrunner bought a used truck on account from North Shore Auto for $12,000, Invoice 200. $ JOURNAL ENTRY7. $

  16. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ 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. $ $ $

  17. Section 2 Recording Transactions in the General Journal (cont'd.) Chapter 6 $ 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? $ $