1. Recording Transactions in a General Journal Making Accounting Relevant Some people keep journals to keep track of their daily activities. 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 1The Accounting Cycle Students will be able to:  Explain the first three steps in the accounting cycle.  Explain why is it necessary to journalize transactions.  Name and describe several examples of source documents.  Apply information from the different kinds of source documents used in a business. Students will be able to:  Explain the first three steps in the accounting cycle.  Explain why is it necessary to journalize transactions.  Name and describe several examples of source documents.  Apply information from the different kinds of source documents used in a business.

3. Section 1The Accounting Cycle Students will be able to:  Define the accounting terms related to journalizing transactions in a journal.  Explain the difference between a calendar year and a fiscal year.  Describe the steps to make a general journal entry  Make general journal entries and correct errors in journal entries. Students will be able to:  Define the accounting terms related to journalizing transactions in a journal.  Explain the difference between a calendar year and a fiscal year.  Describe the steps to make a general journal entry  Make general journal entries and correct errors in journal entries.

4. On October 1 Maria Sanchez took $25,000 from personal savings and deposited that amount to open a business checking account in the name of Roadrunner Delivery Service, Memorandum 1. Chapter 3 The Accounting Equation: Assets = Liabilities + Owner’s Equity 25,000 = 25,000 Cash in Bank Maria Sanchez, Capital Chapter 4 T-Accounts: Cash in Bank Maria Sanchez, Capital25,000 DebitCreditDebitCredit + - - +

5. Business Transaction 1 (con’t.) JOURNAL ENTRY 7. On October 1 Maria Sanchez took $25,000 from personal savings and deposited that amount to open a business checking account in the name of Roadrunner Delivery Service, Memorandum 1. CHAPTER 5 Recording Transactions in the General Journal

6. The Steps of the Accounting Cycle Section 1The Accounting Cycle (con’t.)

7. The First Step in the Accounting Cycle: Collecting and Verifying Source Documents Section 1The Accounting Cycle (con’t.)  The accounting cycle starts by collecting and verifying the accuracy of source documents.  Source document is a paper prepared as evidence of that transaction.  The accounting cycle starts by collecting and verifying the accuracy of source documents.  Source document is a paper prepared as evidence of that transaction.

8. The First Step in the Accounting Cycle: Collecting and Verifying Source Documents (con’t.) Section 1The Accounting Cycle (con’t.) 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.

9. The First Step in the Accounting Cycle: Collecting and Verifying Source Documents (con’t.) Section 1The Accounting Cycle (con’t.) 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.

10. The First Step in the Accounting Cycle: Collecting and Verifying Source Documents (con’t.) Section 1The Accounting Cycle (con’t.) 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.

11. The First Step in the Accounting Cycle: Collecting and Verifying Source Documents (con’t.) Section 1The Accounting Cycle (con’t.) 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.

12. The Second Step in the Accounting Cycle: Analyzing Business Transactions Section 1The Accounting Cycle (con’t.)  Analyzing information on the source documents to determine the debit and credit parts of each transaction.

13. The Third Step in the Accounting Cycle: Recording Business Transactions in a Journal Section 1The Accounting Cycle (con’t.)  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.  The process of recording business transactions in a journal is called journalizing.  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.  The process of recording business transactions in a journal is called journalizing.

14. Section 2Recording Transactions in the General Journal Students will be able to:  Define the accounting terms related to journalizing transactions in a journal.  Explain why is it necessary to journalize transactions.  Describe the steps to make a general journal entry  Make general journal entries and correct errors in journal entries. Students will be able to:  Define the accounting terms related to journalizing transactions in a journal.  Explain why is it necessary to journalize transactions.  Describe the steps to make a general journal entry  Make general journal entries and correct errors in journal entries.

15. Section 2Recording Transactions in the General Journal Enduring Understanding:  The general journal is used to summarize and record all detail daily transactions of a business. Essential Questions  How does a general journal organize and reflect the value of your business? Enduring Understanding:  The general journal is used to summarize and record all detail daily transactions of a business. Essential Questions  How does a general journal organize and reflect the value of your business?

16. Business Transaction (con’t.) DEBIT-CREDIT RULE 4.Which account is debited? For what amount? 5.Which account is credited? For what amount? Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.) BUSINESS TRANSACTION ANALYSIS (con’t.)

17. Business Transaction (con’t.) T ACCOUNTS 6.What is the complete entry in T- account form? Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.) BUSINESS TRANSACTION ANALYSIS (con’t.)

18. Business Transaction (con’t.) JOURNAL ENTRY 7.What is the complete entry in general journal form? Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.) BUSINESS TRANSACTION ANALYSIS (con’t.)

19. Business Transaction 1 ANALYSIS Identify1.The accounts Cash in Bank and Maria Sanchez, Capital are affected. Classify2.Cash in Bank is an asset account. Maria Sanchez, Capital is an owner’s capital account. + / –3.Cash in Bank is increased by $25,000. Maria Sanchez, Capital is increased by $25,000. On October 1 Maria Sanchez took $25,000 from personal savings and deposited that amount to open a business checking account in the name of Roadrunner Delivery Service, Memorandum 1. Section 2Recording Transactions in the General Journal (con’t.)

20. Business Transaction 1 (con’t.) DEBIT-CREDIT RULE 4.Increases in asset accounts are recorded as debits. Debit Cash in Bank for $25,000. 5.Increases in owner’s capital account are recorded as credits. Credit Maria Sanchez, Capital for $25,000. On October 1 Maria Sanchez took $25,000 from personal savings and deposited that amount to open a business checking account in the name of Roadrunner Delivery Service, Memorandum 1. Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.)

21. Business Transaction 1 (con’t.) T ACCOUNTS 6. On October 1 Maria Sanchez took $25,000 from personal savings and deposited that amount to open a business checking account in the name of Roadrunner Delivery Service, Memorandum 1. Maria Sanchez, Cash in BankCapital Debit + 25,000 Credit + 25,000 Credit – Debit – Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.)

22. Business Transaction 1 (con’t.) JOURNAL ENTRY 7. On October 1 Maria Sanchez took $25,000 from personal savings and deposited that amount to open a business checking account in the name of Roadrunner Delivery Service, Memorandum 1. Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.)

23. Business Transaction 4 ANALYSIS Identify1.The accounts Delivery Equipment and Accounts Payable—North Shore Auto are affected. Classify2.Delivery Equipment is an asset account. Accounts Payable— North Shore Auto is a liability account. + / –3.Delivery Equipment is increased by $12,000. Accounts Payable— North Shore Auto is increased by $12,000. On October 9 Roadrunner bought a used truck on account from North Shore Auto for $12,000, Invoice 200. Section 2Recording Transactions in the General Journal (con’t.)

24. Business Transaction 4 (con’t.) DEBIT-CREDIT RULE 4.Increases in asset accounts are recorded as debits. Debit Delivery Equipment for $12,000. 5.Increases in liability accounts are recorded as credits. Credit Accounts Payable—North Shore Auto for $12,000. On October 9 Roadrunner bought a used truck on account from North Shore Auto for $12,000, Invoice 200. Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.)

25. Business Transaction 4 (con’t.) T ACCOUNTS 6. On October 9 Roadrunner bought a used truck on account from North Shore Auto for $12,000, Invoice 200. Delivery Accounts Payable— EquipmentNorth Shore Auto Debit + 12,000 Credit + 12,000 Credit – Debit – Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.)

26. Business Transaction 1 (con’t.) JOURNAL ENTRY 7. On October 9 Roadrunner bought a used truck on account from North Shore Auto for $12,000, Invoice 200. Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.)

27. Correcting Errors in General Journal Entries  An error should never be erased.  Use a pen and a ruler to draw a horizontal line through the entire incorrect item and write the correct information above the crossed-out error.  An error should never be erased.  Use a pen and a ruler to draw a horizontal line through the entire incorrect item and write the correct information above the crossed-out error. Section 2Recording Transactions in the General Journal (con’t.)

28. Check Your Understanding 1.What accounts would you use to record the purchase of a newspaper ad for cash? 2.What accounts would you use to record the sale of business services on account? 1.What accounts would you use to record the purchase of a newspaper ad for cash? 2.What accounts would you use to record the sale of business services on account? Section 2Recording Transactions in the General Journal (con’t.)