1. Chapter 6 Recording Transactions in a General Journal

2. The Accounting Cycle The Accounting Cycle is a series of steps done in each accounting period to keep records in an orderly fashion. Think: What may happen if your parents do not keep financial records in an orderly fashion? Pair/Share

3. The Steps of The Accounting Cycle Open your books to page 132. Review Figure 6-1. Think: Why do you think there is an arrow leading from Step 5 to Step 1 of the accounting cycle? Pair/Share

4. The First Step: Collecting and Verifying Source Documents Most business transactions take place during the daily operations of a business. In the course of one day, a business may pay its rent, place an ad in a local newspaper, contract to have a Web site created, pay its employees, sell products, and purchase new equipment. When a business transaction occurs, a paper, called a source document, is prepared as evidence of the transaction.

5. Types of Common Source Documents: 1.) Invoice – Sometimes called a Bill Lists specific information about a business transaction involving the buying or selling of an item on account. Contains the following information:  Date of the transaction  Quantity  Description  Cost of each item  Payment terms.

6. 2. Receipt A record of cash received by a business. Indicates the date the payment was received The name of the person or business who made the payment. The amount of the payment.

7. 3. Memorandum Brief written message that describes a transaction that takes place within a business. Includes the specific details of the transaction. Often used if no other source documents exist for the transaction.

8. 4. Check Stub Lists the same information contained on the check. (Date, Amount, Person or business to whom the check was written) Also shows the balance in the checking account before and after each check is written.

9. Think/Pair/Share Quickwrite: List some personal source documents that are collected by indviduals for future reference. What are some possible problems that may arise as a result of not keeping important personal source documents? Pair/Share

10. Critical Thinking Examine the source documents listed on page 133. Which documents would be identical for the buyer and seller? Turn and Talk.

11. Step 2 of The Accounting Cycle- Analyzing Business Transactions Analyze the source documents into debit and credit parts. (T-Accounts) Up until now, you have been given a description of the business transaction. On the job, you will analyze the source document. Ex. Roadrunner Delivery Service bought a Computer System from Info-Systems, Inc. for $3,000. Check No. 101 was issued for payment Think: What source documents would be involved in the above transaction?

12. Step 3 of The Accounting Cycle: Recording Transactions in a Journal A journal is a record of the transactions of a business. Kept in chronological order. Journalizing is the process of recording transactions in a journal. The journal is also called the Record/Book of Original Entry because it is where the records are first entered into the accounting system.

13. The Accounting Period May be for any designated length of time – month, quarter, or year. Most businesses use a year or 12 months which is referred to as a fiscal year. If the year runs from Jan.1 to Dec. 31, called a calendar year. Can start calendar year at any time. Ex. Department Stores run from 2/1 to 1/31. School Districts run from 7/1 to 6/30. Think: Why do Department Stores and School Districts use the above described calendar years? Department Stores: School Districts:

14. Bellringer Analyze the following transaction into the proper accounts On October 17, Rico Sanchez – Disc Jockey, sold DJ Services on account to JJ’s Dance Club for $500.00

15. Outcomes Analyze transactions into debit and credit parts Understand the role of the General Journal in the Accounting Process Explain the purpose of an Accounts Recievable Subsidiary Ledger.

16. General Journal An all purpose journal in which all of the transactions of a business may be recorded. Open your books to page 136 and label each part of the General Journal entry in your Source Document packet.