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Journalizing Transactions

Journalizing Transactions. General Notes. If a co. receives cash – it is ALWAYS a debit. If a co. pays cash out – it is ALWAYS a credit. An expense is ALWAYS debited. Sales is ALWAYS credited. Drawing is ALWAYS debited. 4.1. Journals, Source Documents, and Recording Entries in a Journal.

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Journalizing Transactions

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  1. Journalizing Transactions

  2. General Notes • If a co. receives cash – it is ALWAYS a debit. • If a co. pays cash out – it is ALWAYS a credit. • An expense is ALWAYS debited. • Sales is ALWAYS credited. • Drawing is ALWAYS debited.

  3. 4.1 Journals, Source Documents, and Recording Entries in a Journal

  4. Journals and Journalizing • A form for recording transactions in chronological order is called a journal. • Recording transactions in a journal is called journalizing. • Each business uses the kind of journal that best fits the needs of that business.

  5. A Five-Column Journal • Encore Music uses a journal that has five amount columns: General Debit, General Credit, Sales Credit, Cash Debit, and Cash Credit. • A journal amount column headed with an account title is called a special amount column. • A journal amount column that is not headed with an account title is called a general amount column.

  6. A Five-Column Journal Con’t • Transactions are recorded in a journal in order by date.

  7. A Five-Column Journal Con’t • Double-Entry Accounting • Information for each transaction recorded in a journal is called an entry. • The recording of debit and credit parts of a transaction is called double-entry accounting. • Double-Entry Accounting assures that debits equals credits.

  8. A Five-Column Journal Con’t • Source Documents • A business paper from which information is obtained for a journal entry is called a source document. • Objective Evidence is applied when a sourced document is prepared for each transaction. • The amounts must be accurate and true.

  9. Checks • A business form ordering a bank to pay cash from a bank account is called a check. • The source document for cash payments is a check. • The checks are prenumbered.

  10. Sales Invoices • A form describing the goods or services sold, the quantity, and the price is called an invoice. - Used when something is sold on account. • An invoice used as a source document for recording a sale on account is called a sales invoice. • A sales invoice is prepared in duplicate. • The original copy is given to the customer. • The copy is used as the source document for the sale on account transaction.

  11. Receipts • A business form giving written acknowledgement for cash received is called a receipt. • The receipts are prenumbered to help account for all of the receipts.

  12. Memorandums • A form on which a brief message is written describing a transactions is called a memorandum. • They are prenumbered. • A brief note is written on the memorandum to describe the transaction.

  13. Calculator Tapes • At the end of each day, Encore Music uses a printing electronic calculator to total the amount of cash received from sales for that day. • Each calculator tapes is dated and numbered.

  14. Journalizing • An entry consists of four parts: • Date • Debit • Credit • Source Document

  15. 4.4Proving and Ruling a Journal

  16. Proving a Journal Page • After a co. uses all but the last line on a journal page, columns are proved and ruled before totals are carried forward to the next page. • First verify that total debits on the page equal the total credits. • Add each of the amount columns. • Add the debit column totals and the credit column totals. • Verify that the total debits and total credits are equal.

  17. Proving a Journal Page Con’t • 1. Rule a single line across all amount columns directly below the last entry. • On the next line write the date in the date column. • Write Carried Forward in the Account Title and a checkmark in the Post. Ref. • Write each column total below the single line. • Rule double lines.

  18. Starting a New Journal Page • 1. Write the page number, 2, at the top of the journal. • 2. Write the Date, Brought Forward in the Account Title, and check mark in the Post Ref. • 3. Record the column totals brought forward from the previous page. • Always prove and rule a journal at the end of each month even if the last page for the month is not full.

  19. Starting a New Journal Page • Determining that the amount of cash agrees with the accounting records is called proving cash. Cash on hand at the beginning of the month + Total cash received during the month Equals Total -Total cash paid during the month Equals cash balance at the end of the month

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