11 the general journal and the general ledger€¢the journal is the book of original entry because...
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© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
College Accounting
11th Edition
The General Journal and
the General Ledger
ch
apte
r
3
3–1
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Learning Objectives
3–2
After you have completed this chapter, you
will be able to do the following:
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
• The process of recording business transactions in a journal is
called journalizing.
• In the journal, both the debits and the credits of the entire
transaction are recorded in one place.
• A journal is called a book of original entry because the first place
an entry is recorded is in the journal.
• A journal is a book in which business transactions are recorded as
they happen.
• Information about transactions come from source documents that
furnish proof that a transaction has taken place.
• The basic journal form is the two-column general journal.
The General Journal
3–3
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Transaction (a) – June1: J. Conner deposited
$90,000 in a bank account in the name of Conner’s
Whitewater Adventures.
3–4
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 1: Decide which accounts are involved.
Step 2: Classify the accounts involved.
Step 3: Decide if the accounts involved are increased
or decreased.
Step 4: Write the transactions as a debit to one account
(or accounts) and a credit to another account (or
accounts).
Step 5: Check to see if the equation is in balance.
Decide which accounts should be debited
and credited
3–5
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Analyze the Transaction Using the
T- Account Approach
i
n
c
r
e
a
s
e
3–6
Cash
increases, so
it is debited
i
n
c
r
e
a
s
e
J. Conner,
Capital
increases, so
it is credited
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Journal Entry
3–7
1: Page number 2: Date 3: Debit account title
3: Debit amount
4: Indent credit
account title
4: Credit amount
5: Indent further
explanation
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Transaction (b) – June 2: Conner’s Whitewater
Adventures bought equipment, paying cash, $38,000.
3–8
Skip a line between
entries in your homework
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
• When a business buys an asset, the asset should be
recorded at the actual cost (the agreed amount of a
transaction).
• This is called the cost principle.
• Assume in Transaction (c) that Signal Products had
been asking $7,500 for the equipment.
• The cost of the equipment to Conner’s Whitewater
Adventures is $4,320, so that is the amount recorded.
The Cost Principle
3–9
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Transaction (c) – June 3: Conner’s Whitewater
Adventures bought equipment on account from Signal
Products, $4,320.
3–10
Note that the month and year are not
repeated unless they change or a new
journal page begins
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Transaction (d) – June 4: Conner’s Whitewater
Adventures paid Signal Products, a creditor, on
account,$2,000.
3–11
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3–12
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3–13
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3–14
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
• The journal is the book of original entry because
each transaction must first be recorded in full in
the journal.
• The ledger account gives us a complete record of
the transactions recorded in each individual
account.
• The general ledger contains all the accounts.
• The process of transferring information from the
journal to the ledger is called posting.
Posting to the General Ledger
3–15
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3–16
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3–17
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
STEP 1. Write the date of the transaction in the account’s
Date column.
STEP 2. Write the amount of the transaction in the Debit
or Credit column, and enter the balance in the
Balance column under Debit or Credit.
STEP 3. Write the page number of the journal in the Post.
Ref. column of the ledger account. (This is a
cross-reference; it tells you where the amount
came from.)
STEP 4. Record the ledger account number in the Post. Ref.
column of the journal.
The Posting Process
3–18
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3–19
Date of transaction
Amount of transaction
Page number of the journal
Ledger account number
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3–20
Date of transaction
Amount of transaction
Page number of the journal
Ledger account number
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3–21
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Preparation of the Trial Balance
• The trial balance is
simply a list of accounts
that have balances.
• Even when the debit and
credit balances are equal,
other types of errors may
slip through—for
example,
1. Posting the correct debit
or credit amounts to the
incorrect account.
2. Neglecting to journalize
or post an entire
transaction.
3–27
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3–28
STEP 1. Record the transaction of a business in a journal.
STEP 2. Post entries to the accounts in the ledger.
STEP 3. Prepare a trial balance.
Steps in the Accounting Process
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3–29
Source Documents
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3–30
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Manual Ruling Method
3–31
Manual Correcting Errors
Before Posting Has Taken
Place
An entry to record payment of $1,500 rent was
incorrectly debited to Salary Expense.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Manual Ruling Method
3–32
An entry for $120 payment for office supplies was
recorded as $210.
Manual Correcting Errors Before
Posting Has Taken Place
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Manual Ruling Method
3–33
Manual Correcting Errors After
Posting Has Taken Place
An entry to record cash received for professional
fees was correctly journalized as $400. However, it
was posted as a debit to Cash and a credit to
Professional Fees for $4,000.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The correcting entry method
is used when incorrectly
journalized amounts have
been posted. There are two
correcting entry methods.
One-step method. Simply
make one entry that undoes
the error and provides the
correct account.
Two-step method. The first
step reverses the error made
by the original entry. The
second step includes the
correct entry.
Correcting Entry Method — Manual or Computerized
3–34
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Transaction (Jan. 9) : A $620 payment for advertising was
incorrectly journalized and posted as a debit to Miscellaneous
Expense and a credit to Cash for $620. The error was discovered
on January 27. The following correction uses the one-step
method:
3–35
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