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Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

2. The General Journal and the General Ledger
Chapter 4
The General Journal and the General Ledger
Section 1: The General Journal
Section Objectives
4-1 Record transactions in the general journal.
4-2 Prepare compound journal entries.
Chapter 3 explained T accounts and the trial balance, and their usefulness in the preparation of financial statements. Chapter 4 introduces the general journal, the general ledger, and shows how to use both. In the real world, transactions are not recorded using the accounting equation, nor are they recorded using T accounts. Instead, businesses use a Journal to record business transactions. The first objective of this chapter introduces the general journal.

3. The Accounting Cycle Step 2 Journalize the data about transactions
Step 2 Journalize transactions
Step 3 Post transactions to the ledger
Step 1 Analyze and classify transactions
Step 1 Analyze transactions
Step 4 Prepare a worksheet
Step 5 Prepare financial statements
Step 9 Evaluate and communicate financial information
Step Journnalize adjusting entries
Here are the steps in the accounting cycle. 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.
Take a moment to review the steps. Let’s take a look at these steps in more detail.
Step 7 Journalize closing entries
Step 8 Prepare a postclosing trial balance
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4. Journal Record transactions in the general journal
Objective 4-1
Journal
A journal is a diary of business activities.
There are different types of accounting journals.
Transactions are entered in the journal in chronological order.
Our first objective is to learn how to record financial transactions in the general journal.
A journal is a book of original entry. Just like in school when you kept a “diary” or “journal” of your activities, a business or accounting journal does the same thing. The journal keeps a record of the financial events (transactions) in the order that they occurred. We call this chronological order.
Journalizing means to “record” transactions in the journal. A business event (transaction) that has been recorded in the journal is called a journal entry.
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5. GENERAL JOURNAL PAGE 1 Enter the account to be debited.
DATE DESCRIPTION POST DEBIT CREDIT
REF.
2016
Nov. 6
Cash
100,000.00
Carolyn Wells, Capital
100,000.00
Enter the account to be debited.
Enter the amount on the same line in the Debit column.
Take a look at a journal entry. Carolyn Wells, Owner, invested $100,000 cash into the business on November 6. Let’s look at each part of the journal entry. First you should enter the year and the date of the transaction, then enter the name of the account debited flush against the line, then place the dollar amount in the debit column. Next drop down a line and indent ¼ to ½ inch and write the name of the account credited. Place the dollar amount of the credit in the credit column.
Enter the account to be credited.
Enter the amount on the same line in the Credit column.
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6. GENERAL JOURNAL PAGE
DATE DESCRIPTION POST DEBIT CREDIT
REF.
2016
Nov
Cash ,000.00
Carolyn Wells, Capital ,000.00
Investment by owner
, Memo 01
Then enter a complete but concise description of the transaction.
Once the transaction has been journalized, we need to indent a little and add an explanation of the event. The audit trail is a chain of references that make it possible to trace information, locate errors, and prevent fraud. This is an important part of each journal entry.
Whenever possible, the journal entry should refer to the source of the information.
Document numbers are part of the audit trail.
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7. 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.
Which account is debited? For what amount?
Which account is credited? For what amount?
Here are the steps to take to record a journal entry.
3. Make the entry in T-account form.
4. Record the complete entry in general journal form.
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8. The General Journal and the General Ledger
Chapter 4
The General Journal and the General Ledger
Section 2: The General Ledger
Section Objectives
4-3 Post journal entries to general ledger accounts.
4-4 Correct errors made in the journal or ledger.
The third objective of this chapter shows us how to post journal entries into accounts in the general ledger.
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9. Ledgers The ledger contains a separate form for each account.
The third step of the accounting cycle is posting to the ledger.
The process of transferring data from the journal to the ledger is known as posting.
We learned how to journalize in our previous section—that was the second step in the accounting cycle, now let’s learn the third step in our accounting cycle: posting to ledgers. A ledger is the record of final entry. It is the last place that accounting transactions are recorded.
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10. Posting What is posting?
QUESTION:
What is posting?
Posting is the process of transferring data from a journal to a ledger.
ANSWER:
When we transfer data from the general journal to the ledger, this is called “posting”. It’s important that we keep a ledger so that we know at all times the cumulative balances in all of the accounts. T accounts represent the accounts in our ledger. All of our journal entries will update accounts in the ledger. A general ledger is a permanent, classified record of all accounts used in a firm’s operation. The general ledger is the master reference file for the business.
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11. Ledger Account Forms
On the ledger account form shown below, notice the:
Account name and number
Columns for date, description, and posting reference
Columns for debit, credit, debit balance, and credit balance
ACCOUNT CASH ACCOUNT NO
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Nov J1 100, ,000.00
The general ledger looks a lot like the general journal but it has two additional BALANCE columns. We will now post our general journal entries to the general ledger.
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12. Five Steps for Posting Post journal entries to general ledger accounts
Objective 4-3
Five Steps for Posting
On the ledger form, enter the date of the transaction. Enter a description of the entry, if necessary. Usually, routine entries do not require descriptions.
On the ledger form, enter the general journal page in the Posting Reference column.
On the ledger form, enter the debit amount in the Debit column or the credit amount in the Credit column.
On the ledger form, compute the balance and enter it in the Debit Balance column or the Credit Balance column.
On the general journal, enter the ledger account number in the Posting Reference column.
Posting is the third objective of this chapter. Let’s review the five steps of posting from the general journal to the general ledger.
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13. General Ledger Accounts
In the general ledger accounts, the balance sheet accounts appear first and are followed by the income statement accounts. The order is:
Assets
Liabilities
Owner’s equity
Revenue
Expenses
The general ledger contains all of the accounts that exist in a business and all of their activity. In the general ledger, balance sheet accounts are listed first, then the income statement accounts are listed next.
This order of accounts speeds the preparation of the trial balance and the financial statements.
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14. Journal and Ledger Errors
Correct errors made in the journal or ledger
Objective 4-4
Journal and Ledger Errors
Sometimes errors are made when recording transactions in the journal.
The method used to correct an error depends on whether or not the journal entry has been posted to the ledger.
Sometimes errors are made in journalizing or posting.
If the accountant wants to correct an error, the correction method will depend on whether or not the journal entry has been posted to the general ledger.
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15. College Accounting, 14th Edition
Thank You
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College Accounting, 14th Edition
Price • Haddock • Farina
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