1. Recording Transactions in a General Journal
Chapter 6
Recording Transactions in a General Journal
Making Accounting Relevant
Some people keep journals to keep track of their daily activities.
What do you think a business journal is used for? What would be contained in that journal?

2. Section 1 The Accounting Cycle
Chapter 6
Section 1 The Accounting Cycle
What You’ll Learn
The first three steps in the accounting cycle.
Why is it necessary to journalize transactions.
The different kinds of source documents used in a business.
The difference between a calendar year and a fiscal year.

3. Why It’s Important Key Terms Chapter 6 accounting cycle
Section 1 The Accounting Cycle (cont'd.)
Why It’s Important
In the real world, businesses follow a similar accounting cycle, record transactions in a general journal, and operate within a predefined accounting period.
Key Terms
accounting cycle
source document
invoice
receipt
memorandum
Up to this point, in Chapters 3 thru 5, we learned to use the accounting equation (assets = liabilities + owner’s equity) and T-accounts to analyze business transactions. We learned the rules of debit and credit for the different account classifications. In Ch. 6 we will learn how to record business transactions in a journal.
check stub
journal
journalizing
calendar year
fiscal year

4. The Steps of the Accounting Cycle
Section 1 The Accounting Cycle (cont'd.)
Chapter 6
The Steps of the Accounting Cycle

5. Section 1 The Accounting Cycle (cont'd.)
Chapter 6
The First Step in the Accounting Cycle: Collecting and Verifying Source Documents
The accounting cycle starts by collecting and verifying the accuracy of source documents.
A source document is a paper prepared as evidence of a transaction.
SEE PAGE 122, figure 6-1,and 123, figure 6-2
Daily operations of a business generate most business transactions
Paying rent
Placing an ad in a newspaper
Contracting to have a Web site created
Payroll
Selling products or services
Purchasing new equipment
Evidence of the transaction is a SOURCE DOCUMENT…these are used to keep the records of the business
CHECK /VERIFY ACCURACY OF SOURCE DOCUMENTS…check the arithmetic

6. Section 1 The Accounting Cycle (cont'd.)
Chapter 6
The First Step in the Accounting Cycle: Collecting and Verifying Source Documents (cont'd.)
Invoice:
Lists specific
information
about a
business
transaction
involving the
buying or selling of an item. The invoice contains the date of the transaction, along with the quantity, description, and cost of each item.

7. Section 1 The Accounting Cycle (cont'd.)
Chapter 6
The First Step in the Accounting Cycle: Collecting and Verifying Source Documents (cont'd.)
Receipt:
A record of
cash received
by a business.
It indicates the
date the
payment was
received, the
name of the person or business from whom the payment was received, and the amount of the payment.

8. Section 1 The Accounting Cycle (cont'd.)
Chapter 6
The First Step in the Accounting Cycle: Collecting and Verifying Source Documents (cont'd.)
Memorandum:
A brief written
message that
describes a
transaction
that takes
place within a
business. Often
used if no other source document exists for the business transaction.

9. Section 1 The Accounting Cycle (cont'd.)
Chapter 6
The First Step in the Accounting Cycle: Collecting and Verifying Source Documents (cont'd.)
Check Stub:
The check stub
lists the same
information that
appears on a
check: the date
written, the person
or business to
whom the check was written, and the amount of the check. The check stub also shows the balance in the checking account before and after each check is written.

10. Section 1 The Accounting Cycle (cont'd.)
Chapter 6
The Second Step in the Accounting Cycle: Analyzing Business Transactions
Analyzing information on the source documents to determine the debit and credit parts of each transaction.
Up to now when you were learning to analyze business transaction, you were given a description of each transaction, such as:
“Roadrunner Delivery Service bought a computer system from Info-Systems Inc. for $3,000 and issued Check 101 in payment”
You would DEBIT (or increase) the asset account “Computer Equipment” for $3,000: Computer Equipment
D+ C-
3000
AND CREDIT (or decrease) the asset account “Cash in Bank”: Cash in Bank
NOW: instead of getting a description of the transaction you would analyze the source documents: the receipt from Info-Systems for the Computer, and the check stub from Check 101 and determine the accounts to debit and credit, which will be the same from the description

11. Section 1 The Accounting Cycle (cont'd.)
Chapter 6
The Third Step in the Accounting Cycle: Recording Business Transactions in a Journal
Record the debit and credit parts of each business transaction in a journal.
A journal is a record of all of the transactions of a business (record or book of original entry)
Only place where complete details of a transaction are recorded.
The process of recording business transactions in a journal is called journalizing.
After analyzing the source documents and determining the debit and credit parts of each transaction you are ready to record the debit and credit parts of each business transaction in a journal

12. The Accounting Period Chapter 6
Section 1 The Accounting Cycle (cont'd.)
Chapter 6
The Accounting Period
Accounting records are summarized for a certain period of time, called an accounting period
Calendar Year: beginning on January 1, ending on December 31
The fiscal year is an accounting period of twelve months (not the same as calendar year).
School districts fiscal year begin 07/01 – 06/30, Retail stores 02/01 – 01/31
Examples of fiscal year:
Department stores fiscal years usually begin February 1 and end January 31 of the following year
School districts usually have fiscal years that begin on July 1 and end on June 30

13. Problem 6-1, Page 125 Analyzing a Source Document
What is the name of the company providing service?
What is the name of business receiving the service?
What is the date of the invoice?
What item was sold?
What is the price for this item?
What are the payment terms?