Recording Transactions in a General Journal. Explain the first three steps in the accounting cycle....

CHAPTER 6Recording Transactions in a

General Journal

Explain the first three steps in the accounting cycle.

Give and describe several examples of source documents.

Explain the purpose of journalizing. Apply information from source documents. Describe the steps to make a general journal

entry. Make general journal entries. Correct errors in general journal entries. Define the accounting terms introduced in this

chapter.

OBJECTIVES

WHY Recording Transactions in a General Journal is Important?

Every transaction you have with a business

is documented in some way.

Companies keep permanent records

of transactions.

EXPLORING THE Real World

1995 They were students at Stanford University when they met. (Web search technology)

1998 the company Google Inc. was started in a garage.◦ The site performed about 10,000 searches a day.◦ In 2 ½ yrs, it grew to 100 million.

Today, Google is the top Internet search engine. The company takes in billions of dollars in advertising

each year.◦ That means, they keep their accountants busy with the

business activities.

Larry Page Sergey Brin

What do you think?

If you were just starting an Internet company, what types of financial information would you record?

Sell advertising Invests in computer equipment Pays software engineers

Applying Your Accounting Knowledge

Have you every kept a daily journal of the things that happen during your day?

Diary?

Where are the daily financial happenings are recorded

General Journal

WHAT IS THE MAIN IDEA?

The Steps in the accounting cycle

The accounting cycle is a series of steps done in each accounting period to keep records in an orderly fashion

The different types of accounting periods

Accounting cycle Source document Invoice Receipt Memorandum

KEY TERMS

Check stub Journal Journalizing Fiscal year Calendar year

The First 3 Steps

Step 1: Collect and verify source documents.

Step 2: Analyze each transaction.Step 3: Journalize each transaction.

SECTION 1Accounting Cycle: Steps of the Accounting

Cycle

The accounting period of a business that is separated into

activities.

Invoice

Receipt Memorandum Check Stub

Step 1: Collect and Verify Source Documents

Invoice

Receipt

Memorandum Check Stub


Invoice Receipt

Memorandum

Check Stub


Invoice Receipt Memorandum

Check Stub


Analyze the information on the source documents to determine the debit and credit parts.

Step 2: Analyzing Business Transactions

What do you already know? Analyze business transactions using the

rules of debit and credit• You were given a description of each

transaction such as:

Roadrunner Delivery Service bought a computer system from Info-Systems Inc. for 43,000 and issued

Check 101.

Step 3: Recording Business Transactions in a Journal Record the debit and credit amounts in the

Journal.

(Journalizing)

Journals are kept in chronological order, that is, the order in which the transactions occur.

A record of the transactions of a

business.The process of recording business transactions in

a journal

ACCOUNTING PERIOD

Fiscal YearAn accounting

period of 12 months

Calendar YearBegins: January 1 Ends: December 31

TYPES OF ACCOUNTING PERIOD

•Accounting records are summarized for a certain period of time •Designated length of time such as a month, a quarter, or a year.

Problem 6-1

1 What is the name of the company providing the service or merchandise?

Jaymax Office Supply

2 What is the name of the business receiving the service or merchandise?

Dario’s Accounting Services

3 What is the date of the invoice? April 9, 2012

4 What is the invoice number? 479

5 What item was sold? Fax Machine

6 What is the price for this item? $299.00

7 What are the payment terms? Payable in 30 days

Problem 6-2

Step 1 Date of Transaction D

Step 2 Name of the Account Debited F

Step 3 Amount of the Debit E

Step 4 Name of the Account Credited B

Step 5 Amount of the Credit A

Step 6 Source Document Reference C

Problem 6-3

Trans AccountAccount

ClassificationAccount General Journal

Increase Decrease Debit Credit

1Passenger Van Asset Cash in Bank Asset

2Utilities Expense Expense Cash in Bank Asset

3Cash in Bank Asset Day-Care Fees Revenue

Problem 6-4

Section 2: Recording Transactions in the General Journal

It is an all-purpose journal in which all of the transactions of a business may be recorded.

#1 Date of transaction

GENERAL JOURNAL PAGE____ 1 2

DATE DESCRIPTION POST.REF. DEBIT CREDIT

1 Year

2 Month Day Account Name to be Debited 22 000 00

3 Account Name to be Credited 22 000 00

4 Explanation

5

#2 Name of the account to be Debited

#3 Debit Amount

#4 Name of the account to be Credited #6 Source document

reference or an explanation

#5 Credit Amount

BUSINESS TRANSACTION ANALYSES: Steps to Success

1. Identify the accounts affected

2. Determine the amount of increase or decrease for each account

affected.

3. Which account is debited? For what amount?

4. Which account is credited? For what amount?

5. What is the complete entry in T-Account Form

6. Record in the General Journal Form.

GENERAL JOURNAL PAGE __1__

1 2

DATE DESCRIPTION POST.

REF. DEBIT CREDIT

1 2012

2

3

4

Cash in Bank

Debit

25,000

Credit

Maria Sanchez, CapitalDebit Credit

25,000

Oct 1 Cash in BankMaria Sanchez, Capital

Memorandum 1

25000

0025 000 00

Roadrunner Delivery Service155 Gateway Blvd.

Sacramento, CA 94230

MEMORANDUM 1

TO: Accounting ClerkFROM: Maria SanchezDATE: October 1, 2012SUBJECT: Contributed Personal Funds to the Business

I have contributed $25,000.00 from my personal savings for a deposit to the business, Roadrunner Deliverly Service.

GENERAL JOURNAL PAGE 1

1 2


REF. DEBIT CREDIT

1 2012

4

5

6

7

Office EquipmentDebit

400.00

CreditMaria Sanchez, Capital

Debit Credit

400.00

2 Office EquipmentMaria Sanchez, Capital

400 00

400 00

Memorandum 2Roadrunner Delivery Service

155 Gateway Blvd.Sacramento, CA 94230

MEMORANDUM 2

TO: Accounting ClerkFROM: Maria SanchezDATE: October 2, 2012SUBJECT: Contributed Personal Phones

I have contributed two telephones from my home to the business. The phones are valued at $200 each. Total contribution = $400.


1 2


REF. DEBIT CREDIT

1 2012

4

8

9

10

Computer EquipmentDebit

3,000.00

CreditCash in Bank

Debit Credit

3,000.00

4 Computer EquipmentCash in Bank

Check 101$ 3,000.00 No. 101

Date October 4, 2012To Info-Systems Inc.For Computer

Dollars Cents

Balance brought forward 25,000 00Add deposits

Total 25,000 00Less this check 3,000 00Balance carried forward 22,000 00

3 00000

3 000 00


1 2


REF. DEBIT CREDIT

1 2012

10

11

12

13

Delivery EquipmentDebit

12,000.00

CreditAccounts Payable – North Shore Auto

Debit Credit

13,000.00

9 Delivery Equipment

Accts. Pay—North Shore AutoInvoice 200

12 00000

12 000 00

North Shore Auto440 Lake Drive


INVOICE NO. 200

TO: Roadrunner Delivery Service155 Gateway Blvd.Sacramento, CA 94230

DATE:ORDER NO:SHIPPED BY:TERMS:

October 9, 201299674n/aInstallment

QTY ITEM UNIT PRICE TOTAL

1 Dodge Truck Used $ 12,000.00 $ 12,000.00


1 2


REF. DEBIT CREDIT

1 2012

13

14

15

16

Accounts Receivable—Green CompanyDebit

200.00

CreditOffice Equipment

Debit Credit

200.00

11 Accts. Rec.—Green Company

Office EquipmentMemorandum 3

200 00200 00



MEMORANDUM 3

TO: Accounting ClerkFROM: Maria SanchezDATE: October 11, 2012SUBJECT: Sold Telephone

Sold one telephone on account to Green Company for $200.00.


1 2


REF. DEBIT CREDIT

1 2012

16

17

18

19

Accounts Payable—North Shore AutoDebit

350.00

CreditCash in Bank

Debit Credit

350.00

12 Accts. Pay.—North Shore AutoCash in Bank

Check 102$ 350.00 No. 102

Date October 12, 2012To North Shore AutoFor Installment on Truck

Dollars Cents

Balance brought forward 22,000 00Add deposits

Total 22,000 00Less this check 350 00Balance carried forward 21,650 00

35000

350 00


1 2


REF. DEBIT CREDIT

1 2012

22

23

24

25

Cash in BankDebit

200.00

CreditAccts. Rec.—Green CompanyDebit Credit

200.00

14 Cash in BankAccts. Rec.—Green Company

Receipt 1

20000

200 00



RECEIPTNo. 1

October 14, 2012

RECEIVED FROM Green Company

$200.00

Two hundred and no/100 ------------------------------------------------------------ DOLLARS

RECEIVED BY __Maria Sanchez___


1 2


REF. DEBIT CREDIT

1 2012

22

23

24

25

Cash in BankDebit

1,200.00

CreditDelivery Revenue

Debit Credit

1,200.00

15 Cash in BankDelivery Revenue

Receipt 2

1 20000

1 200 00



RECEIPTNo. 2

October 15, 2012

RECEIVED FROM Sims Corporation

$ 1,200.00

One thousand two hundred and no/100 ------------------------------------------------- DOLLARS

RECEIVED BY __Maria Sanchez___


1 2


REF. DEBIT CREDIT

1 2012

25

26

27

28

Rent ExpenseDebit

700.00

CreditCash in Bank

Debit Credit

700.00

16 Rent ExpenseCash in Bank

Check 103$ 700.00 No. 103

Date October 16, 2012To Tooley & C0. ManagementFor Rent

Dollars Cents

Balance brought forward 21,650 00Add deposits 10/14 200 00 10/15 1,200 00Total 23,050 00Less this check 700 00Balance carried forward 22,350 00

70000

700 00


1 2


REF. DEBIT CREDIT

1 2012

28

29

30

31

Advertising ExpenseDebit

75.00

CreditAccounts Payable – Beacon Advertising

Debit Credit

75.00

18 Advertising Expense

Accts. Pay—Beacon AdvertisingInvoice 129

7500

75 00

Beacon Advertising10200 Prairie ParkwaySacramento, CA 94230

INVOICE NO. 129

TO: Roadrunner Delivery Service155 Gateway Blvd.Sacramento, CA 94230


October 18, 2012699n/aPayable in 30 days


1 PrintAd $ 75.00 $ 75.00


1 2


REF. DEBIT CREDIT

1 2012

31

32

33

34

Accounts Receivable—City NewsDebit

1,450.00

CreditDelivery Revenue

Debit Credit

1,450.00

20 Accts. Rec.—City News

Delivery RevenueSales Invoice 1

1 45000

1 450 00



SALES INVOICE NO. 1

TO: City News10900 Main StreeSacramento, CA 94230


October 20, 2012300n/aPayable in 30 days


1 Delivery Services $ 1,450.00 $ 1,450.00

Recording Transactions in a General Journal. Explain the first three steps in the accounting cycle....

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