chapter seven the general journal mcgraw-hill/irwin accounting fundamentals, 7/e © 2006 the...
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CHAPTER SEVEN
The General Journal
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1. Record transactions in a general journal.
2. Use a chart of accounts.
3. Correct errors in the journal.
THE GENERAL JOURNAL
Objectives:
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The Use of the General Journal
•The accounting record known as a journal is used to list all the necessary information about a transaction in one place.
•The journal is known as the book of original entry.
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The Use of the General Journal (continued)
•The process of recording these transactions in the journal is known as journalizing, or recording journal entries.
•Double-entry accounting is the system of journalizing when each transaction affects at least two accounts.
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Journalizing a Business’s Transactions
• Accounts used in the recording of transactions are taken from a chart of accounts.
• The chart of accounts lists, by number in chronological order, the accounts determined to be used by the business.
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Journalizing a Business’s Transactions (continued)
•Pencil footings are used at the bottom of the money columns to provide balance of debits and credits.
•Entries may contain more than one debit and/or credit.
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Transaction
• Record the owner’s investment in the business:
•Cash, $32,000•Accounts Receivable, $2,000•Office Equipment, $12,000•Delivery Trucks, $60,000•Accounts Payable, $20,000 •Capital, $86,000
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Transaction Analysis
• The assets (debits) and liabilities (credit) and owner’s equity account (credit) are recorded in the journal.
Post Ref Debit Credit
20 xx
Nov 1 32,000Accounts Receivable 2,000Office Equipment 12,000Delivery Trucks 60,000 Accounts Payable 20,000 Christopher Johns, Capital 86,000 Investment in the business
Date Description
Cash
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Transaction
• Paid $1800 to Wilson Management for the November rent.
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Transaction Analysis
• An increase in expenses decreases owner’s equity (debit Rent Expense).
• An asset decreases (credit Cash).Post Ref Debit Credit
20 xx
1 1,800 Cash 1,800Paid November rent.
Date Description
Rent Expense
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Transaction
• Paid $400 to Kenworth Truck Sales on account.
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Transaction Analysis
• A liability decreases (debit Accounts Payable).
• An asset decreases (credit Cash).Post Ref Debit Credit
20 xx
10 400 Cash 400Paid Kenw orth Truck Sales on account
Date Description
Accounts Payable
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Transaction
•Paid $150 for gasoline and oil for the trucks.
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Transaction Analysis
• An increase in expenses decreases owner’s equity (debit Truck Expense).
• An asset decreases (credit Cash).Post Ref Debit Credit
20 xx
13 150 Cash 150Paid for gasoline and oil.
Date Description
Truck Expense
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Accounting Terminology
•Chart of accounts
•Chronological order
•Compound entry
•Double-entry accounting
•General journal
•Journal
•Journalizing
•Opening Entry
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Chapter Summary
• A journal is used to keep a record of the day-to-day financial activities of a business.
• Some people use “T” accounts to analyze the transactions before entering them into the journal.
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Chapter Summary(continued)
•The journal is used to list essential information about each transaction.
•The journal is called the book or record of original entry.
•A general journal is a common type of journal.
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Chapter Summary(continued)
• A systematically arranged list of a business’s accounts is known as a chart of accounts.
• The chart of accounts shows account classifications (assets, liabilities, owner’s equity, revenue, and expenses) as well as the name and number of each account.
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Chapter Summary(continued)
•A journal entry may contain more than one debit and/or credit. This type of entry is called a compound entry.
•The totals of the debit and credit columns must be equal no matter how many accounts are used in a transaction.
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1. “T” accounts may be used in place of journalizing.
2. The journal is known as the record or book of original entry.
3. Revenue and expense accounts are not on the chart of accounts.
Topic QuizAnswer the following true/false questions:
TRUE
FALSE
FALSE
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Investigating on the Internet
Sources of information about general journals can be accessed at the websites of most businesses.
As a research assignment, access a business website and report those sources of information that might concern the use of journals in business.
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(Return to Topic Quiz)
1. “T” accounts may be used in place of journalizing.
FALSE“T” accounts may be used to analyze a transaction, but the journal must be used to record the financial activity and the accounts affected.
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(Return to Topic Quiz)
3. Revenue and expense accounts are not on the chart of accounts.
FALSEAll accounts are listed on the
chart of accounts.