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Journalizing Transactions

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Presentation on theme: "Journalizing Transactions"— Presentation transcript:

1 Journalizing Transactions
Chapter 3 Journalizing Transactions

2 Journals, Source Documents, and Recording Entries in a Journal
GAAP (Generally Accepted Accounting Practice) (principles) is to make a more permanent record by recording transactions in a journal A form for recording transactions in chronological order is called a journal Recording transactions in a journal is called journalizing

3 Journals The type of journal that is used is determined by nature of business and number of transactions Five amt col.: General Debit, General Credit, Sales Credit, Cash Debit, Cash Credit Page 57 - Journal

4 Special Amount Columns
A journal amount column headed with an account title is called a special amount column. -- Used for frequently occurring transactions Most transactions involve receipt or payment of Cash A large number of transactions involve receiving cash from Sales Special amount columns are used for Sales Credit, Cash Debit and Cash Credit Eliminates writing an account title in the Account Title Column

5 General Amount Columns
A journal amount column that is not headed with an account title is called a general amount column. General Debit and General Credit

6 Benefits of a Journal Accuracy -- Debit and credit parts of each transaction are recorded in one place Transactions are recorded in chronological order -- easy to locate Information for each transaction recorded in a journal is called an entry The recording of debit and credit parts of a transaction is called double-entry accounting Affects at least two accounts -- assures that debits equal credits

7 Source Documents A business paper from which information is obtained for a journal entry is called a source document. Proves that the transaction did occur Accounting concept: Objective Evidence – a source document is prepared for every transaction RULES Transactions should be journalized only if it occurred Amounts must be accurate and true verify by comparing entry with source document.

8 Examples of Source Documents
PAGES 58-59 Check stub – describes information about the cash payment transaction Checks – a business form ordering a bank to pay cash from a bank account. All cash payments are made by check Invoice – a form describing the goods or services sold, the quantity, and the price. -- Prenumbered Sales Invoice – an invoice used as a source document for recording a sale on account Also called sales ticket or sales slip

9 Examples of Source Documents
Receipts – a business form giving written acknowledgement for cash received. When cash is received from other sources other than sales, prepare a receipt -- Prenumbered Memorandum – a form on which a brief message is written describing a transactions Used when no other source document is prepared or when additional explanation is needed, Prenumbered Calculator Tape – total amount of cash received from sales is printed on electronic calculator -- daily sales T12 – tape for twelfth day of the month --- page 75

10 Recording Transactions in a Five-Column Journal
Entry consists of 4 parts: Date Debit 3. Credit 4. Source document DATE 1st entry on journal page – must contain year, month, and day all other entries – must contain day only DEBIT Debits to cash – use special amount column Write amount CREDIT Credits to cash – use special amount column Credits to Sales – use special amount column All other credits -- Write title of account to be credited SOURCE DOCUMENT Write number in Doc. No. column Document number – a cross reference from the journal to the source document

11 Proving and Ruling a Journal
After next to last line of journal page is used, columns are proved and ruled before totals are carried forward to next page. Also at end of each month – prove and rule a journal

12 Proving and Ruling a Journal – Lesson 3-4
PROVING A JOURNAL Verify that total debits on the page equal total credits 3 steps add each of the amount columns add the debit column totals, and then add the credit column totals verify that the total debits and total credits are equal

13 Ruling a Journal Page Rule a single line across all amount columns directly below the last entry On next line, write the date Write the words Carried Forward in the Account Title column -- check mark in Post Ref column to show that nothing on this line needs to be posted 4. Write each column total below the single line 5. Rule double lines below the column totals across all amount columns

14 Starting a New Journal Page
Column totals from previous page are carried forward to a new page Write page number at the top of journal Write the date – year, month and day Write the words Brought Forward in the Acct Title Col. -- check mark in Post Ref Record the column totals

15 Completing a Journal At the End of the Month
Prove last page -- debits equal credits Prove cash Cash on hand at beginning of month plus total cash received during month (debit) + 15,600.00 Equals total = 15,600.00 less total cash paid during month (credit) ,980.00 Equal cash balance at the end of the month = 8,620.00 (this should equal checkbook balance on the next unused check stub) = 8,620.00 3. Rule journal

16 Standard Accounting Practices
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