recording transactions in a general journal

Recording Transactions in a General Journal

The Accounting Cycle

The accounting period of a business is separated into activities that help the business keep its accounting records in an orderly fashion.

These activities are called the accounting cycle.

The Steps of the Accounting Cycle

Step #1: Collecting and Verifying Source Documents

The accounting cycle starts by collecting and verifying the accuracy of source documents.

Source documents: a paper prepared as evidence of a transaction.

The First Step: Collecting and Verifying Source Documents

Invoice:Lists specificinformationabout abusinesstransactioninvolving thebuying or selling of an item. The invoice contains the date of the transaction, along with the quantity, description, and cost of each item.

The First Step: Collecting and Verifying Source Documents

Receipt:A record ofcash receivedby a business.It indicates thedate the payment was received, thename of the person or business from whom the payment was received, and the amount of the payment.

The First Step: Collecting and Verifying Source Documents

Memorandum:A brief writtenmessage thatdescribes atransactionthat takesplace within abusiness. Oftenused if no other source document exists for the business transaction.

The First Step in the Accounting Cycle: Collecting and Verifying Source Documents

Check Stub:The check stublists the sameinformation thatappears on acheck: the datewritten, the personor business towhom 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.

Step #2: Analyzing Business Transactions

Analyzing information on the

source documents to determine

the debit and credit parts of each

transaction.

Step 3: 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.

The Accounting Period Accounting records are summarized

for a certain period of time, called an accounting period

Most businesses use a year, as their accounting period begins on January 1 and ends on December 31

The “calendar year”

The fiscal year is an accounting period of twelve months

Business Transaction

ANALYSIS Identify 1. Identify the accounts effected.

Classify 2. Classify the accounts effected. + / – 3. Determine the amount of the increase or decrease for each account effected.

BUSINESS TRANSACTION ANALYSIS

Recording a General Journal Entry

Business Transaction (cont'd.)

DEBIT-CREDIT RULE 4. Which account is debited? For what amount?

5. Which account is credited? For what amount?

Recording a General Journal Entry (cont'd.)

BUSINESS TRANSACTION ANALYSIS (cont'd.)

The General Journal

Recording a General Journal EntryThe general journal is an all purpose

journal in which all the transactions of a business may be recorded.1 Date of the transaction

4 Name of the account credited

2 Name of the account debited 3 Amount of the debit

6 Source documentreference or an explanation

5 Amount of the credit