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GLENCOE / McGraw-Hill

GLENCOE / McGraw-Hill. The General Journal and the General Ledger. The General Journal. Section Objectives. Record transactions in the general journal. Prepare compound journal entries. QUESTION:. What is the accounting cycle?. ANSWER:.

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GLENCOE / McGraw-Hill

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  1. GLENCOE / McGraw-Hill

  2. The General Journal and the General Ledger

  3. The General Journal Section Objectives • Record transactions in the general journal. • Prepare compound journal entries.

  4. QUESTION: What is the accounting cycle? ANSWER: The accounting cycle is a series of steps performed during each accounting period to classify, record, and summarize data for a business and to produce needed financial information. Page 96

  5. Page 96 The Accounting Cycle This section discusses the first two steps of the accounting cycle.

  6. Page 96 The Accounting Cycle Step 2 Journalize the data about transactions Step 2Journalize the data about transactions Step 3Post the data about transactions Step 4 Prepare a worksheet Step 1 Analyze transactions Step 1Analyze transactions Step 5Prepare financial statements Step 9Interpret the financial information Step 6Record adjusting entries Step 7Record closing entries Sneak Preview!Page 176 Step 8Prepare a postclosing trial balance

  7. Page 96 Journals

  8. QUESTION: What is a journal? ANSWER: A journal is a record of original entry. Page 96

  9. Page 96 Journal • A journal is a diary of business activities. • There are different types of journals. • Transactions are entered in the journal in chronological order.

  10. QUESTION: What is chronological order? ANSWER: Chronological order is the order in which events occur. Page 96

  11. Page 96 The General Journal

  12. Page 96 Objective 1 Record transactions in the general journal.

  13. QUESTION: What is a general journal? ANSWER: A general journal is a financial record for entering all types of business transactions. Page 96

  14. QUESTION: What is journalizing? ANSWER: Journalizing is the process of recording transactions in a journal. Page 96

  15. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. 2004 Nov. 6 Cash 80,000.00 80,000.00 Linda Carter, Capital Page 96 Enter the account to be debited. Enter the amount on the same line in the Debit column. Enter the account to be credited. Enter the amount on the same line in the Credit column.

  16. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. 2004 Nov. 6 , Memo 01 Investment by owner Page 96 2004 Nov. 6 Cash 80,000.00 Linda Carter, Capital 80,000.00 Then enter a complete but concise description of the transaction. Whenever possible, the journal entry should refer to the source of the information. Document numbers are part of the audit trail.

  17. QUESTION: What is an audit trail? ANSWER: An audit trail is a chain of references that makes it possible to trace information, locate errors, and prevent fraud. Page 97

  18. Page 97 Recording November Transactions in the General Journal

  19. Page 97 Recording a Business Transaction 1. Analyze the financial event. • Identify the accounts affected. • Classify the accounts affected. • Determine the amount of increase or decrease for each account affected. 2. Apply the rules of debit and credit. a. Which account is debited? For what amount? b. Which account is credited? For what amount? 3. Make the entry in T-account form. 4. Record the complete entry in general journal form.

  20. Page 97 Business Transaction On November 6 Linda Carter withdrew $80,000 from personal savings and deposited it in a new business checking account for Carter Consulting Services.

  21. Page 97 Cash Investment by Owner Which account is credited? Which account is debited? For what amount? For what amount?

  22. (b) 80,000 Page 97 Cash Investment by Owner Cash Linda Carter, Capital (a) 80,000

  23. Page 97 Cash Investment by Owner GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. 2004 Nov. 6 Cash 80,000.00 Linda Carter, Capital 80,000.00 Investment by owner, Memo 01

  24. Page 98 Business Transaction On November 7 Carter Consulting Services issued Check 1001 for $20,000 to purchase a computer and other equipment.

  25. Page 98 Cash Purchase of Equipment Which account is credited? Which account is debited? For what amount? For what amount?

  26. (d) 20,000 Page 98 Cash Purchase of Equipment Equipment Cash (c) 20,000

  27. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. Nov. 7 Page 99 Cash Purchase of Equipment Equipment 20,000.00 Cash 20,000.00 Purchased equip., Check 1001

  28. Page 99 Business Transaction On November 10 Carter Consulting Services purchased office equipment on account for $15,000.

  29. Page 99 Credit Purchase of Equipment Which account is credited? Which account is debited? For what amount? For what amount?

  30. (f) 15,000 Page 99 Credit Purchase of Equipment Equipment Accounts Payable (e) 15,000

  31. Page 99 Credit Purchase of Equipment GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. Nov. 10 Equipment 15,000.00 Accounts Payable 15,000.00 Purchased equipment on account from Office Plus, Inv. 2223, due in 60 days

  32. Page 100 Business Transaction On November 28 Carter Consulting Services purchased supplies for $2,000, Check 1002.

  33. Page 100 Cash Purchase of Supplies Which account is credited? Which account is debited? For what amount? For what amount?

  34. (h) 2,000 Page 100 Cash Purchase of Supplies Supplies Cash (g) 2,000

  35. Page 100 Cash Purchase of Supplies GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. Nov. 28 Supplies 2,000.00 Cash 2,000.00 Purchased supplies, Check 1002

  36. Page 101 Business Transaction On November 30 Carter Consulting Services paid Office Plus $3,000 in partial payment of Invoice 2223, Check 1003.

  37. Page 101 Payment to a Creditor Which account is debited? Which account is credited? For what amount? For what amount?

  38. (i) 3,000 Page 101 Payment to a Creditor Accounts Payable Cash (j) 3,000

  39. Page 101 Payment to a Creditor GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. Nov. 30 Accounts Payable 3,000.00 Cash 3,000.00 Paid on account, Office Plus, Invoice 2223, Check 1003

  40. Page 102 Business Transaction On November 30 Carter Consulting Services wrote Check 1004 for $6,000 to prepay rent for December and January.

  41. Page 102 Recording Prepaid Rent Which account is debited? Which account is credited? For what amount? For what amount?

  42. (l) 6,000 Page 102 Recording Prepaid Rent Prepaid Rent Cash (k) 6,000

  43. Page 102 Recording Prepaid Rent GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. Nov. 30 Prepaid Rent 6,000.00 Cash 6,000.00 Paid Dec. and Jan. rent in advance; Check 1004

  44. Page 102 Recording December Transactions in the General Journal

  45. Page 102 1. Performed services for $21,000 in cash. Which account is debited? Which account is credited? For what amount? For what amount?

  46. 21,000 Page 102 1. Performed services for $21,000 in cash. Cash Fees Income 21,000

  47. GENERAL JOURNAL PAGE 2 DATE DESCRIPTION POST. DEBIT CREDIT REF. 2004 Dec. 31 Page 102 1. Performed services for $21,000 in cash. Cash 21,000.00 Fees Income 21,000.00 Performed services for cash

  48. Page 102 2. Performed services for $7,000 on credit. Which account is credited? Which account is debited? For what amount? For what amount?

  49. 7,000 Page 102 2. Performed services for $7,000 on credit. Accounts Receivable Fees Income 7,000

  50. GENERAL JOURNAL PAGE 2 DATE DESCRIPTION POST. DEBIT CREDIT REF. Dec. 31 Page 102 2. Performed services for $7,000 on credit. Accounts Receivable 7,000.00 Fees Income 7,000.00 Performed services on credit

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