CE 2400O Green Ch04

User Manual: CE-2400O

Open the PDF directly: View PDF PDF.
Page Count: 30

4
4
TERMS PREVIEW
journal
journalizing
entry
general journal
double-entry
accounting
source document
check
invoice
sales invoice
receipt
memorandum
As described in Chapter 3, transactions are analyzed into debit and
credit parts before information is recorded. A form for recording transac-
tions in chronological order is called a Recording transactions in
a journal is called
Transactions could be recorded in the accounting equation. However,
most companies wish to create a more permanent record by recording
transactions in a journal.
Each business uses the kind of journal that best fits the needs of that
business. The nature of a business and the number of transactions to be
recorded determine the kind of journal to be used.
The word journal comes from the Latin diurnalis, meaning daily. Most
businesses conduct transactions every day. To keep from getting over-
loaded, the businesses will make entries in their accounting journals
every day.
journalizing.
journal.
JOURNALS AND JOURNALIZING
AFTER STUDYING CHAPTER 4, YOU WILL BE ABLE TO:
1. Define accounting terms related to journalizing transactions.
2. Identify accounting concepts and practices related to jounal-
izing transactions.
3. Record in a general journal transactions to set up a business.
4. Record in a general journal transactions to buy insurance for
cash and supplies on account.
5. Record in a general journal transactions that affect owner’s
equity and receiving cash on account.
6. Start a new journal page.
Recording Transactions
in a General Journal
64
F
Y
I
The Small Business Administration (SBA)
has programs that offer free management
and accounting advice to small business
owners. The SBA sponsors various workshops
and publishes a variety of booklets for small
business owners.
CHAPTER 4 Recording Transactions in a General Journal 65
ACCOUNTING
IN YOUR CAREER
HIGH STANDARDS FOR
JOURNALIZING
Sandra Huffman has worked for
Marquesa Advertising for 30 days as
an accounting clerk, a position for
which the company owner, Ramona
Marquesa, hired her. She journalizes all
transactions, about 50 per day, handles all incoming and outgoing mail, prepares and files
all source documents, and performs other duties as assigned.
One day Ramona asked to see the journal. Sandra handed the journal to Ramona, who
scanned a few pages while Sandra fidgeted in her chair. Sandra didn’t know exactly what
to expect, but she knew she had not done as good a job with journalizing transactions as
she should have.
Ramona then sighed and said, “I’m concerned about this journal, Sandra. You have
recorded all transactions in pencil, and I notice numerous erasures. I don’t know if the
debits equal the credits, but I can see right away that this one transaction for $20,000
should have been for $2,000. Some of the dates are missing and some are out of order.
What do you suggest we do to turn this situation around?”
After apologizing, Sandra thanked Ramona for giving her the chance to improve her
work. She explained that she realized she had not been giving the journal the priority it
required and went on to describe how she would improve her performance in the future.
Critical Thinking:
1. What do you think Sandra should say about the journal to demonstrate that she knows it is
important?
2. What specific improvements do you think Sandra should make?
Using a Journal
Information for each transaction recorded in
a journal is called an A journal with two
amount columns in which all kinds of entries
can be recorded is called a
Encore Music uses a general journal.
The columns in Encore Music’s general
journal are Date, Account Title, Doc. No., Post.
Ref., Debit, and Credit. The use of each column
is described later in this chapter.
Accuracy
Information recorded in a journal includes
the debit and credit parts of each transaction
recorded in one place. The information can be
verified by comparing the data in the journal
with the transaction data to assure that all infor-
mation is correct.
Chronological Record
Transactions are recorded in a journal by
date in the order in which the transactions occur.
All information about each transaction is record-
ed in one place, making the information for a
specific transaction easy to locate.
Double-Entry Accounting
The recording of debit and credit parts of a
transaction is called
In double-entry accounting, each transaction
affects at least two accounts. Both the debit part
and the credit part are recorded for each transac-
tion. This procedure reflects the dual effect of
each transaction on the business’s records.
Double-entry accounting assures that debits
equal credits.
Source Documents
A business paper from which information is
obtained for a journal entry is called a
Each transaction is described
by a source document that proves that the trans-
action did occur. For example, Encore Music pre-
pares a check stub for each cash payment made.
The check stub describes information about the
cash payment transaction for which the check is
prepared. The accounting concept, Objective
Evidence, is applied when a source document is
prepared for each transaction. (CONCEPT:
Objective Evidence)
A transaction should be journalized only if it
actually occurs. The amounts recorded must be
accurate and true. Nearly all transactions result
in the preparation of a source document. Encore
Music uses five source documents: checks, sales
invoices, receipts, calculator tapes, and
memorandums.
source document.
double-entry accounting.
general journal.
entry.
66 CHAPTER 4 Recording Transactions in a General Journal
4-1 Journals, Source Documents, and
Recording Entries in a Journal
A GENERAL JOURNAL
GENERAL JOURNAL PAGE
1
2
3
4
5
6
7
8
9
1
2
3
4
5
6
7
8
9
DATE ACCOUNT TITLE DEBIT CREDIT
DOC.
NO.
POST.
REF.
A business form ordering a bank to pay cash
from a bank account is called a The
source document for cash payments is a check.
Encore Music makes all cash payments by check.
The checks are prenumbered to help Encore
Music account for all checks. Encore Music’s
record of information on a check is the check
stub prepared at the same time as the check. A
check and check stub prepared by Encore Music
are shown.
Procedures for preparing checks and check
stubs are described in Chapter 6.
check.
CHECKS
SALES INVOICES
NO. 1 $
Date 20
To
For
BAL. BRO’T. FOR’D. . . . . . . . . . . .
AMT. DEPOSITED . . .
SUBTOTAL . . . . . . . . . . . . . . . . . . .
OTHER:
SUBTOTAL. . . . . . . . . . . . . . . . . . .
AMT. THIS CHECK . . . . . . . . . . . .
BAL. CAR’D. FOR’D. . . . . . . . . . . .
Date
063101098 43452119
FOR
$
20
PAY TO THE
ORDER OF
NO. 1 63-109
631
For Classroom Use Only
DOLLARS
peoples national bank
530 Anoka Avenue
Tampa, FL 33601
Tampa, FL 33602
1,577.00
August 3, --
Quick Clean Supplies Co.
Supplies
0 00
10,000 00
10,000 00
81 --
10,000 00
1,577 00
8,423 00
August 3, --
Quick Clean Supplies Co. 1,577.00
One thousand five hundred seventy-seven and no
100
Supplies Barbara Treviño
Encore Music
CHAPTER 4 Recording Transactions in a General Journal 67
When services are sold on account, the seller
prepares a form showing information about the
sale. A form describing the goods or services
sold, the quantity, and the price is called an
An invoice used as a source document
for recording a sale on account is called a
A sales invoice is also referred to
as a sales ticket or a sales slip.
A sales invoice is prepared in duplicate. The
original copy is given to the customer. The copy
is used as the source document for the sale on
account transaction. (CONCEPT: Objective
Evidence) Sales invoices are numbered in
sequence.
sales invoice.
invoice.
530 Anoka Avenue
Tampa, FL 33601
Sold to: No.
Date
Terms
Kids Time
405 Michigan Avenue
Tampa, FL 33619
1
8/12/--
30 days
Description Amount
Individual lessons on Aug. 12
Total
$200.00
$200.00
Encore Music
68 CHAPTER 4 Recording Transactions in a General Journal
Receipts
A business form giving written
acknowledgement for cash received is called a
When cash is received from sources
other than sales, Encore Music prepares a
receipt. The receipts are prenumbered to help
account for all of the receipts. A receipt is the
source document for cash received from transac-
tions other than sales. (CONCEPT: Objective
Evidence)
receipt.
OTHER SOURCE DOCUMENTS
530 Anoka Avenue
Tampa, FL 33601
Encore Music
August 1,
No. 1
Date 20
From
For
$$
Receipt No. 1
20
Rec’d
from
For
Dollars
Amount
Received By
--
Barbara Treviño
Investment
10,000 00 10,000 00
August 1, --
Barbara Treviño
Investment
Ten thousand and no/100
Barbara Treviño
Memorandums
A form on which a brief message is written
describing a transaction is called a
When no other source
document is prepared for a transaction, or when
an additional explanation is needed about a
transaction, Encore Music prepares a memoran-
dum. (CONCEPT: Objective Evidence) Encore
Music’s memorandums are prenumbered to help
account for all of the memorandums. A brief
note is written on the memorandum to describe
the transaction.
Calculator Tapes
Encore Music collects cash at the time
services are rendered to customers. At the end of
each day, Encore Music uses a printing electronic
calculator to total the amount of cash received
from sales for that day. By totaling all the
individual sales, a single
source document is
produced for the total
sales of the day. Thus,
time and space are saved
by recording only one
entry for all of a day’s
sales. The calculator tape is the source document
for daily sales. (CONCEPT: Objective Evidence) A
calculator tape used as a source document is
shown.
Encore Music dates and numbers each calcu-
lator tape. For example, in the illustration, the
number, T12, indicates that the tape is for the
twelfth day of the month.
memorandum.
0
.
00
150
.
00
65
.
00
110
.
00
325
.
00
*
*
Aug. 12, 20--
T12
Information for each transaction recorded in
a journal is known as an entry. An entry consists
of four parts: (1) date, (2) debit, (3) credit, and
(4) source document. Before a transaction is
recorded in a journal, the transaction is analyzed
into its debit and credit parts.
The source document for this transaction is
Receipt No. 1. (CONCEPT: Objective Evidence)
The analysis of this transaction is shown in the
T accounts.
The asset account, Cash, is increased by a
debit, $10,000.00. The owner’s capital account,
Barbara Treviño, Capital, is increased by a credit,
$10,000.00.
August 1. Received cash from owner as an
investment, $10,000.00. Receipt No. 1.
CHAPTER 4 Recording Transactions in a General Journal 69
RECEIVED CASH FROM OWNER AS AN INVESTMENT
GENERAL JOURNAL PAGE 1
1
2
1
2
DATE ACCOUNT TITLE DEBIT CREDIT
Aug.
20-- 1 Cash
Barbara Treviño, Capital
DOC.
NO.
POST.
REF.
1000000
1000000
R1
4Source
Document
3Credit
2Debit
1Date
F
Y
I
Dollars and cents signs and decimal points
are not used when writing amounts on
ruled accounting paper. Sometimes a color
tint or a heavy vertical rule is used on
printed accounting paper to separate the
dollars and cents columns.
Journalizing cash received from owner as an investment
1. Date. Write the date, 20--, Aug. 1, in the Date column. This entry is the first one on this journal page.
Therefore, the year and month are both written for this entry. Neither the year nor the month are written
again on the same page.
2. Debit. Write the title of the account debited, Cash, in the Account Title column. Write the debit amount,
$10,000.00, in the Debit column.
3. Credit. On the next line, indented about 1 centimeter, write the title of the account credited, Barbara
Treviño, Capital, in the Account Title column. This account title is indented to indicate that this account is
credited. Write the credit amount, $10,000.00, in the Credit column.
4. Source document. On the first line of the entry, write the source document number, R1, in the Doc. No.
column. The source document number, R1, indicates that this is Receipt No. 1. (The source document num-
ber is a cross reference from the journal to the source document. If more details are needed about this
transaction, a person can refer to Receipt No. 1.)
Debits must equal credits for each entry in a general journal. After the entry is journalized, the equality of
debits and credits is verified. For this entry, the total debits, $10,000.00, equal the total credits,
$10,000.00.
S
T
E
P
S
Cash
10,000.00
Barbara Treviño, Capital
10,000.00
The source document for this transaction is
Check No. 1. (CONCEPT: Objective Evidence) The
analysis of this transaction is shown in the
T accounts.
The asset account, Supplies, is increased by a
debit, $1,577.00. The asset account, Cash, is
decreased by a credit, $1,577.00.
August 3. Paid cash for supplies, $1,577.00.
Check No. 1.
70 CHAPTER 4 Recording Transactions in a General Journal
PAID CASH FOR SUPPLIES
GENERAL JOURNAL PAGE 1
3
4
3
4
DATE ACCOUNT TITLE DEBIT CREDIT
3 Supplies
Cash
DOC.
NO.
POST.
REF.
157700
157700
C1
4Source
Document
3Credit
2Debit
1Date
Supplies
1,577.00
Cash
1,577.00
F
Y
I
If you draw T accounts for analyzing trans-
actions, it will make journalizing easier.
Journalizing cash paid for supplies
1. Date. Write the date, 3, in the Date column. This is not the first entry on the
journal page. Therefore, the year and month are not written for this entry.
2. Debit. Write the title of the account debited, Supplies, in the Account Title
column. Write the debit amount, $1,577.00, in the Debit column.
3. Credit. On the next line, indented about 1 centimeter, write the title
of the account credited, Cash, in the Account Title column. Write
the credit amount, $1,577.00, in the Credit column.
4. Source document. On the first line on this entry, write the
source document number, C1, in the Doc. No. column. The source
document number, C1, indicates that this is Check No. 1.
For this entry, the total debits, $1,577.00, equal the total credits,
$1,577.00.
S
T
E
P
S
REMEMBER
If you misspell words in your written communications, people may mistrust the quality of your accounting skills. Note
that in the word receipt the “e” comes before the “i” and there is a silent “p” before the “t” at the end of the word.
Journalizing entries into a general journal
A journal is given in the Working Papers. Your instructor will guide you through the following
example.
Ruth Muldoon owns Muldoon Copy Center, which uses the following accounts:
Cash Prepaid Insurance Ruth Muldoon, Drawing Rent Expense
Accts. Rec.—Lester Dodge Accts. Pay.—Ron’s Supplies Sales Utilities Expense
Supplies Ruth Muldoon, Capital Miscellaneous Expense
Transactions: Apr. 1. Received cash from owner as an investment, $7,000.00. R1.
2. Paid cash for supplies, $425.00. C1.
4. Journalize each transaction completed during April of the current year. Use page 1 of the jour-
nal. Source documents are abbreviated as follows: check, C; memorandum, M; receipt, R; sales
invoice, S; calculator tape, T. Save your work to complete Work Together on page
75
.
Journalizing entries into a general journal
A journal is given in the Working Papers. Work this problem independently.
Gale Klein owns Klein’s Service Center, which uses the following accounts:
Cash Prepaid Insurance Gale Klein, Drawing Miscellaneous Expense
Accts. Rec.—Connie Vaughn Accts. Pay.—Osamu Supply Co. Sales Rent Expense
Supplies Gale Klein, Capital Advertising Expense
Transactions: June 2. Received cash from owner as an investment, $1,500.00. R1.
3. Paid cash for supplies, $35.00. C1.
5. Journalize each transaction completed during June of the current year. Use page 1 of the jour-
nal. Source documents are abbreviated as follows: check, C; memorandum, M; receipt, R; sales
invoice, S; calculator tape, T. Save your work to complete On Your Own on page
75
.
journal
journalizing
entry
general
journal
double-entry
accounting
source
document
check
invoice
sales invoice
receipt
memorandum
1. In what order are transactions recorded
in a journal?
2. Why are source documents important?
3. List the four parts of a journal entry.
ERMS
REVIEW
ERMS
REVIEW
T
TUDIT YOUR
UNDERSTANDING
UDIT YOUR
UNDERSTANDING
A
A
N YOUR
OWN
ON YOUR
OWN
O
ORK
TOGETHER
W
ORK
TOGETHER
W
CHAPTER 4 Recording Transactions in a General Journal 71
72 CHAPTER 4 Recording Transactions in a General Journal
The source document for this transaction is
Check No. 2. (CONCEPT: Objective Evidence) The
analysis of this transaction is shown in the
T accounts.
The asset account, Prepaid Insurance, is
increased by a debit, $1,200.00. The asset
account, Cash, is decreased by a credit, $1,200.00.
August 4. Paid cash for insurance, $1,200.00.
Check No. 2.
PAID CASH FOR INSURANCE
Prepaid Insurance
1,200.00
Cash
1,200.00
GENERAL JOURNAL PAGE 1
5
6
5
6
DATE ACCOUNT TITLE DEBIT CREDIT
4 Prepaid Insurance
Cash
DOC.
NO.
POST.
REF.
120000
120000
C2
Source
Document
3Credit
2Debit
1Date 4
Journalizing cash paid for insurance
1. Date. Write the date, 4, in the Date column.
2. Debit. Write the title of the account debited, Prepaid
Insurance, in the Account Title column. Write the debit amount,
$1,200.00, in the Debit column.
3. Credit. On the next line, indented about 1 centimeter, write the
title of the account credited, Cash, in the Account Title column. Write
the credit amount, $1,200.00, in the Credit column.
4. Source document. On the first line of this entry, write the source docu-
ment number, C2, in the Doc. No. column.
For this entry, the total debits, $1,200.00, equal the total credits,
$1,200.00.
S
T
E
P
S
REMEMBER
All amounts recorded in the general journal must have an account title writ-
ten in the Account Title column.
4-2 Journalizing Buying Insurance, Buying on
Account, and Paying on Account
CHAPTER 4 Recording Transactions in a General Journal 73
Encore Music ordered these supplies by tele-
phone. Encore Music wishes to record this trans-
action immediately. Therefore, a memorandum
is prepared that shows supplies received on
account.
The source document for this transaction is
Memorandum No. 1. (CONCEPT: Objective
Evidence) The analysis of this transaction is
shown in the T accounts.
The asset account, Supplies, is increased by a
debit, $2,720.00. The liability account, Accounts
Payable—Ling Music Supplies, is increased by a
credit, $2,720.00
August 7. Bought supplies on account from
Ling Music Supplies, $2,720.00. Memorandum
No. 1.
BOUGHT SUPPLIES ON ACCOUNT
GENERAL JOURNAL PAGE 1
7
8
7
8
DATE ACCOUNT TITLE DEBIT CREDIT
7 Supplies
Accts. Pay.—Ling Music Supplies
DOC.
NO.
POST.
REF.
272000
272000
M1
4Source
Document
2Debit
1Date
3Credit
F Y I
Of all service
businesses in the
United States, only 4
percent employ 50 or
more people and 80
percent have fewer
than 10 employees.
Journalizing supplies bought on account
1. Date. Write the date, 7, in the Date column.
2. Debit. Write the title of the account debited, Supplies, in the
Account Title column. Write the debit amount, $2,720.00,
in the Debit column.
3. Credit. On the next line, indented about 1 centimeter, write
the title of the account credited, Accounts Payable—Ling Music
Supplies, in the Account Title column. Write the credit amount,
$2,720.00, in the Credit column.
4. Source document. On the first line of this entry, write the source
document number, M1, in the Doc. No. column.
For this entry, the total debits, $2,720.00, equal the total credits,
$2,720.00.
S
T
E
P
S
Supplies
2,720.00
Accts. Pay.—Ling Music Supplies
2,720.00
REMEMBER
When recording transactions in a general journal, the account title that is credited is normally indented.
The source document for this transaction is
Check No. 3. (CONCEPT: Objective Evidence) The
analysis of this transaction is shown in the
T accounts.
The liability account, Accounts Payable—Ling
Music Supplies, is decreased by a debit, $1,360.00.
The asset account, Cash, is decreased by a credit,
$1,360.00.
August 11. Paid cash on account to Ling
Music Supplies, $1,360.00. Check No. 3.
PAID CASH ON ACCOUNT
GENERAL JOURNAL PAGE 1
9
10
9
10
DATE ACCOUNT TITLE DEBIT CREDIT
11 Accts. Pay.—Ling Music Supplies
Cash
DOC.
NO.
POST.
REF.
136000
136000
C3
4Source
Document
3Credit
2Debit
1Date
Cash
1,360.00
Accts. Pay.—Ling Music Supplies
1,360.00
n high school, Mary M.
Witherspoon considered
pursuing a degree in
accounting. Her career choice was
confirmed by ACCUMATION, a
career education program for high
school students sponsored by the
Dallas Chapter of the Texas Society of
CPAs. Students participate in this
week-long summer program, which
includes visits to an international
accounting firm and the chance to sit
in on university accounting classes.
Mary graduated with a BBA in
Accounting and works for Oryx
Energy Company, a large
independent producer of oil and gas
in Dallas. Currently in gas balancing
accounting, she reconciles records of
jointly owned properties to ensure
Oryx receives their entitled gas
volumes. Working in the corporate
environment has allowed Mary to
change job responsibilities over her
career to gain additional experience.
Mary believes that exceptional
people skills coupled with technical
experience is the formula for business
success. People skills include
written and verbal communication,
respecting diversity, and the ability
to work in teams.
Mary also serves as a district
vice-president of the American
Business Women’s Association
(ABWA). ABWA promotes the
advancement of women in business by
sponsoring continuing education, pro-
viding leadership training, and offer-
ing encouragement.
“High school students can contact
their state or local society of certified
public accountants for accounting
career information,” says Mary. “We
CPAs support programs to encourage
student interest in our field.”
I
M
ARY
W
ITHERSPOON
A
CCOUNTING
AT
W
ORK
74
Journalizing entries into a general journal
Use the journal that you started for Work Together on page
71
. Your instructor will guide you
through the following example.
Ruth Muldoon owns Muldoon Copy Center, which uses the following accounts:
Cash Prepaid Insurance Ruth Muldoon, Drawing Rent Expense
Accts. Rec.—Lester Dodge Accts. Pay.—Ron’s Supplies Sales Utilities Expense
Supplies Ruth Muldoon, Capital Miscellaneous Expense
Transactions: Apr. 5. Bought supplies on account from Ron’s Supplies, $300.00. M1.
7. Paid cash for insurance, $600.00. C2.
9. Paid cash on account to Ron’s Supplies, $300.00. C3.
5. Journalize the transactions continuing on the next blank line of page 1 of the journal. Save
your work to complete Work Together on page
81
.
Journalizing entries into a general journal
Use the journal that you started for On Your Own on page
71
. Work this problem
independently.
Gale Klein owns Klein’s Service Center, which uses the following accounts:
Cash Prepaid Insurance Gale Klein, Drawing Miscellaneous Expense
Accts. Rec.—Connie Vaughn Accts. Pay.—Osamu Supply Co. Sales Rent Expense
Supplies Gale Klein, Capital Advertising Expense
Transactions: June 5. Paid cash for insurance, $100.00. C2.
9. Bought supplies on account from Osamu Supply Co., $155.00. M1.
10. Paid cash on account to Osamu Supply Co., $155.00. C3.
6. Journalize the transactions continuing on the next blank line of page 1 of the journal. Save
your work to complete On Your Own on page
81
.
1. When cash is paid for insurance, which account is listed on the first line of the entry?
2. When supplies are bought on account, which account is listed on the first line of the entry?
3. When supplies are bought on account, which account is listed on the second line of the entry?
4. When cash is paid on account, which account is listed on the second line of the entry?
UDIT YOUR
UNDERSTANDING
UDIT YOUR
UNDERSTANDING
A
A
N YOUR
OWN
ON YOUR
OWN
O
ORK
TOGETHER
W
ORK
TOGETHER
W
CHAPTER 4 Recording Transactions in a General Journal 75
76 CHAPTER 4 Recording Transactions in a General Journal
The source document for this transaction is
Calculator Tape No. 12. (CONCEPT: Objective
Evidence) The analysis of this transaction is
shown in the T accounts.
The asset account, Cash, is increased by a
debit, $325.00. The revenue account, Sales, is
increased by a credit, $325.00.
The reason that Sales is increased by a credit
is discussed in the previous chapter. The
owner’s capital account has a normal credit bal-
ance. Increases in the owner’s capital account
are shown as credits.
Because revenue increases owner’s equity,
increases in revenue are recorded as credits. A
revenue account, therefore, has a normal credit
balance.
August 12. Received cash from sales,
$325.00. Tape No. 12.
RECEIVED CASH FROM SALES
GENERAL JOURNAL PAGE 1
11
12
11
12
DATE ACCOUNT TITLE DEBIT CREDIT
12 Cash
Sales
DOC.
NO.
POST.
REF.
32500
32500
T12
4Source
Document
3Credit
2Debit
1Date
4-3 Journalizing Transactions That Affect Owner’s
Equity and Receiving Cash on Account
Journalizing cash received from sales
1. Date. Write the date, 12, in the Date column.
2. Debit. Write the title of the account debited, Cash, in the Account Title column. Write the debit amount,
$325.00, in the Debit column.
3. Credit. On the next line, indented about 1 centimeter, write the title of the account credited, Sales, in the
Account Title column. Write the credit amount, $325.00, in the Credit column.
4. Source document. On the first line of this entry, write the source document number, T12, in the Doc.
No. column.
For this entry, the total debits, $325.00, equal the total credits, $325.00.
S
T
E
P
S
Sales
325.00
Cash
325.00
REMEMBER
Don’t forget to record the source document in the Doc. No. column of the general journal.
CHAPTER 4 Recording Transactions in a General Journal 77
The source document for this transaction is
Sales Invoice No. 1. (CONCEPT: Objective
Evidence) The analysis of this transaction is
shown in the T accounts.
The asset account, Accounts Receivable—Kids
Time, is increased by a debit, $200.00. The
revenue account, Sales, is increased by a credit,
$200.00.
August 12. Sold services on account to Kids
Time, $200.00. Sales Invoice No. 1.
SOLD SERVICES ON ACCOUNT
GENERAL JOURNAL PAGE 1
13
14
13
14
DATE ACCOUNT TITLE DEBIT CREDIT
12 Accounts Rec.—Kids Time
Sales
DOC.
NO.
POST.
REF.
20000
20000
S1
4Source
Document
3Credit
2Debit
1Date
Sales
200.00
Accts. Rec.—Kids Time
200.00
Journalizing services sold on account
1. Date. Write the date, 12, in the Date column.
2. Debit. Write the title of the account debited,
Accounts Receivable—Kids Time, in the Account
Title column. Write the debit amount, $200.00, in
the Debit column.
3. Credit. On the next line, indented about 1 centimeter, write the title
of the account credited, Sales, in the Account Title column. Write the
credit amount, $200.00, in the Credit column.
4. Source document. Write the source document number, S1, in the
Doc. No. column.
For this entry, the total debits, $200.00, equal the total credits,
$200.00.
S
T
E
P
S
REMEMBER
In double-entry accounting, each transaction affects at least two
accounts. At least one account will be debited and at least one account
will be credited.
F
Y
I
Accounting is not just for accountants. For
example, a performing artist earns revenue
from providing a service. Financial
decisions must be made such as the cost of
doing a performance, the percentage of rev-
enue paid to a manager, travel expenses,
and the cost of rehearsal space.
78 CHAPTER 4 Recording Transactions in a General Journal
The source document for this transaction is
Check No. 4. (CONCEPT: Objective Evidence) The
analysis of this transaction is shown in the
T accounts.
The expense account, Rent Expense, is
increased by a debit, $250.00. The asset account,
Cash, is decreased by a credit.
The reason that Rent Expense is increased by
a debit is discussed in the previous chapter. The
owner’s capital account has a normal credit bal-
ance. Decreases in the owner’s capital account
are shown as debits.
Because expenses decrease owner’s equity,
increases in expenses are recorded as debits. An
expense account, therefore, has a normal debit
balance.
August 12. Paid cash for rent, $250.00.
Check No. 4.
GENERAL JOURNAL PAGE 1
15
16
17
18
19
20
21
15
16
17
18
19
20
21
DATE ACCOUNT TITLE DEBIT CREDIT
12
12
Rent Expense
Cash
Utilities Expense
Cash
DOC.
NO.
POST.
REF.
25000
4500
25000
4500
C4
C5
4Source
Document
2Debit
1Date
3Credit
PAID CASH FOR AN EXPENSE
Journalizing cash paid for an expense
1. Date. Write the date, 12, in the Date column.
2. Debit. Write the title of the account debited, Rent Expense, in the
Account Title column. Write the debit amount, $250.00, in the Debit
column.
3. Credit. On the next line, indented about 1 centimeter, write the title of
the account credited, Cash, in the Account Title column. Write the credit
amount, $250.00, in the Credit column.
4. Source document. Write the source document number, C4, in the
Doc. No. column.
For this entry, the total debits, $250.00, equal the total credits, $250.00.
Whenever cash is paid for an expense, the journal entry is similar to the
entry discussed above. Therefore, the journal entry to record paying cash
for utilities is also illustrated.
S
T
E
P
S
Cash
250.00
Rent Expense
250.00
F Y I
Source documents
can be critically
important in
tracking down
errors. Businesses file
their source
documents so they
can be referred to if
it is necessary to
verify information
entered into their
journals.
CHAPTER 4 Recording Transactions in a General Journal 79
The source document for this transaction is
Receipt No. 2. (CONCEPT: Objective Evidence)
The analysis of this transaction is shown in the
T accounts.
The asset account, Cash, is increased
by a debit, $100.00. The asset account,
Accounts Receivable—Kids Time, is
decreased by a credit, $100.00.
August 12. Received cash on account from
Kids Time, $100.00. Receipt No. 2.
RECEIVED CASH ON ACCOUNT
GENERAL JOURNAL PAGE 1
19
20
19
20
DATE ACCOUNT TITLE DEBIT CREDIT
12 Cash
Accounts Rec.—Kids Time
DOC.
NO.
POST.
REF.
10000
10000
R2
4Source
Document
3Credit
2Debit
1Date
Accts. Rec.—Kids Time
100.00
Cash
100.00
Journalizing cash received on account
1. Date. Write the date, 12, in the Date column.
2. Debit. Write the title of the account debited, Cash, in the Account
Title column. Write the debit amount, $100.00, in the Debit
column.
3. Credit. On the next line, indented about 1 centimeter, write the
title of the account credited, Accounts Receivable—Kids
Time, in the Account Title column. Write the credit
amount, $100.00, in the Credit column.
4. Source document. Write the source document
number, R2, in the Doc. No. column.
For this entry, the total debits, $100.00, equal
the total credits, $100.00.
S
T
E
P
S
REMEMBER
Increases in expenses and in withdrawals decrease owner’s equity. Decreases in owner’s equity are recorded as deb-
its. Therefore, increases in expenses and in withdrawals are recorded as debits.
The source document for this transaction is
Check No. 6. (CONCEPT: Objective Evidence) The
analysis of this transaction is shown in the
T accounts.
The reason that Barbara Treviño, Drawing is
increased by a debit is discussed in the previous
chapter. Decreases in the owner’s capital account
are shown as debits. Because withdrawals
decrease owner’s equity, increases in
withdrawals are recorded as debits. A withdraw-
al account, therefore, has a normal debit balance.
August 12. Paid cash to owner for personal
use, $100.00. Check No. 6.
PAID CASH TO OWNER FOR PERSONAL USE
GENERAL JOURNAL PAGE 1
21
22
21
22
DATE ACCOUNT TITLE DEBIT CREDIT
12 Barbara Treviño, Drawing
Cash
DOC.
NO.
POST.
REF.
10000
10000
C6
4Source
Document
3Credit
2Debit
1Date
Cash
100.00
Barbara Treviño, Drawing
100.00
L
EGAL
I
SSUES
IN
A
CCOUNTING
proprietorship is a business
owned and controlled by
one person. The advantages
of a proprietorship include:
•Ease of formation.
•Total control by the owner.
•Profits that are not shared.
However, there are some
disadvantages of organizing a propri-
etorship:
•Limited resources. The owner is the
only person who can invest cash
and other assets in the business.
•Unlimited liability. The owner is
totally responsible for the liabilities
of the business. Personal assets,
such as a car, can be claimed by
creditors to pay the business’s
liabilities.
•Limited expertise. Limited time,
energy, and experience can be put
into the business by the owner.
•Limited life. A proprietorship must
be dissolved when the owner dies
or decides to stop doing business.
The owner is required to follow
the laws of both the federal
government and the state and city in
which the business is formed. Most
cities and states have few, if any, legal
procedures to follow. Once any legal
requirements are met, the proprietor-
ship can begin business.
Should the owner decide to
dissolve the proprietorship, he or she
merely needs to stop doing business.
Noncash assets can be sold, with the
cash used to pay any creditors.
A
F
ORMING AND
D
ISSOLVING A
P
ROPRIETORSHIP
80
Journalizing transactions that affect owner’s equity into a general journal
Use the chart of accounts and journal from Work Together on page 75. Your instructor will guide
you through the following example.
Transactions: Apr. 12. Paid cash for rent, $950.00. C4.
13. Received cash from sales, $2,200.00. T13.
14. Sold services on account to Lester Dodge, $625.00. S1.
19. Paid cash for electric bill, $157.00. C5.
20. Received cash on account from Lester Dodge, $300.00. R2.
21. Paid cash to owner for personal use, $1,400.00. C6.
6. Journalize the transactions continuing on the next blank line of page 1 of the journal. Save
your work to complete Work Together on page 85.
Journalizing transactions that affect owner’s equity into a general journal
Use the chart of accounts and journal from On Your Own on page 75. Work this problem
independently.
Transactions: June 11. Paid cash for rent, $200.00. C4.
12. Sold services on account to Connie Vaughn, $200.00. S1.
16. Received cash from sales, $1,050.00. T16.
17. Paid cash for postage (Miscellaneous Expense), $32.00. C5.
19. Received cash on account from Connie Vaughn, $100.00. R2.
20. Paid cash to owner for personal use, $250.00. C6.
7. Journalize the transactions continuing on the next blank line of page 1 of the journal. Save
your work to complete On Your Own on page 85.
1. When cash is received from sales, which account is listed on the first line of the entry?
2. When cash is received from sales, which account is listed on the second line of the entry?
3. When services are sold on account, which account is listed on the second line of the entry?
4. When cash is paid for any reason, what abbreviation is used for the source document?
5. When cash is received on account, what abbreviation is used for the source document?
UDIT YOUR
UNDERSTANDING
UDIT YOUR
UNDERSTANDING
A
A
ORK
TOGETHER
W
ORK
TOGETHER
W
N YOUR
OWN
ON YOUR
OWN
O
CHAPTER 4 Recording Transactions in a General Journal 81
82 CHAPTER 4 Recording Transactions in a General Journal
A general journal page is complete when
there is insufficient space to record any more
entries. A partial view of Encore Music’s
completed page 1 of the general journal is
shown.
Encore Music has one blank line remaining
at the bottom of page 1. However, each journal
entry requires at least two lines. If a journal
entry is split between two different pages, the
equality of debits and credits for the entry is not
as easily verified. Also, to a person examining a
single journal page, a split entry will appear
incorrect. Therefore, a journal entry should not
be split and journalized on two different pages.
If there is only one blank line remaining on a
journal page, a new page is started.
4-4 Starting a New Journal Page
A COMPLETED JOURNAL PAGE
GENERAL JOURNAL PAGE 1
1
2
3
4
31
32
33
34
35
1
2
3
4
31
32
33
34
35
DATE ACCOUNT TITLE DEBIT CREDIT
Aug.
20-- 1
3
18
20
Cash
Barbara Treviño, Capital
Supplies
Cash
Advertising Expense
Cash
Supplies
Accts. Pay.—Sullivan Office Supplies
DOC.
NO.
POST.
REF.
1000000
157700
20000
2000
1000000
157700
20000
2000
R1
C1
C9
M2
Successful small business owners typically have the following
characteristics: confidence to make decisions, determination to
keep trying during hard times for the business, willingness to
take risks, creativity to surpass the competition, and an inner
need to achieve.
SMALL
BUSINESS
SSPPOOTTLLIIGGHHTT
STARTING A NEW GENERAL JOURNAL PAGE
After one page of a general journal is filled, a
new journal page is started. A new page is
started by writing the page number in the space
provided in the journal heading.
GENERAL JOURNAL PAGE 2
1
2
3
4
1
2
3
4
DATE ACCOUNT TITLE DEBIT CREDIT
DOC.
NO.
POST.
REF.
G
LOBAL
P
ERSPECTIVE
s our world becomes
smaller and global trade
increases, U.S. businesses
become more involved in transactions
with foreign businesses. These
transactions can be stated in terms of
U.S. dollars or in the currency of the
other country. If the transaction
involves foreign currency, a U.S. busi-
ness must convert the foreign currency
into U.S. dollars before the transaction
can be recorded. (CONCEPT: Unit of
Measurement)
The value of foreign currency may
change daily. In the United States, the
exchange rate is the value of foreign
currency in relation to the U.S. dollar.
Current exchange rates can be found
in many daily newspapers, on-line
services, or banks.
The exchange rate is stated in
terms of one unit of foreign currency.
Using Germany as an example, pre-
sume that one German mark is worth
0.5789 U.S. dollars (or about 58 U.S.
cents). This rate would be used when
exchanging German marks for U.S.
dollars.
A conversion formula can be used
to find out how many foreign currency
units can be purchased with one U.S.
dollar. The formula is:
1/exchange rate foreign
currency per U.S. dollar
1 dollar/0.5789 1.7272
marks per dollar
A
F
OREIGN
C
URRENCY
83
84 CHAPTER 4 Recording Transactions in a General Journal
In completing accounting work, Encore
Music follows standard accounting practices.
These practices include procedures for error cor-
rections, abbreviating words, writing dollar and
cents signs, and rulings.
1. Errors are corrected in a way that does not
cause doubts about what the correct infor-
mation is. If an error is recorded, cancel
the error by neatly drawing a line through
the incorrect item. Write the correct item
immediately above the canceled item.
2. Sometimes an entire entry is incorrect and
is discovered before the next entry is jour-
nalized. Draw neat lines through all parts
of the incorrect entry. Journalize the entry
correctly on the next blank lines.
3. Sometimes several correct entries are
recorded after an incorrect entry is made.
The next blank lines are several entries
later. Draw neat lines through all incorrect
parts of the entry. Record the correct items
on the same lines as the incorrect items,
directly above the canceled parts.
4. Words in accounting records are written
in full when space permits. Words may be
abbreviated only when space is limited.
All items are written legibly.
5. Dollars and cents signs and decimal
points are not used when writing
amounts on ruled accounting paper.
Sometimes a color tint or a heavy vertical
rule is used on printed accounting paper
to separate the dollars and cents columns.
6. Two zeros are written in the cents column
when an amount is in even dollars, such
as $500.00. If the cents column is left
blank, doubts may
arise later about
the cor-
rect amount.
7. Neatness is very
important in
accounting
records so that
there is never any
doubt about what
information has
been recorded. A
ruler is used to
draw lines.
GENERAL JOURNAL PAGE 2
9
10
11
12
13
14
15
16
17
18
19
20
21
22
DATE ACCOUNT TITLE DEBIT CREDIT
28
29
29
29
30
30
Cash
Sales
Rent Expense
Cash
Repair Expense
Cash
Supplies
Cash
Miscellaneous Expense
Cash
Barbara Treviño, Drawing
Cash
DOC.
NO.
POST.
REF.
350000
500
5000
1000
10000
50000
35000
500
5000
1000
10000
50000
T28
C22
C21
C22
C23
C24
35000
1000
1000
4
3
1
2
6
9
10
11
12
13
14
15
16
17
18
19
20
21
22
5
STANDARD ACCOUNTING PRACTICES
1. When is a general journal page complete?
2. If an entire entry is incorrect and is discovered before the next entry is journalized, how
should the incorrect entry be corrected?
3. If several correct entries are recorded after an incorrect entry is made, how should the
incorrect entry be corrected?
Journalizing transactions and starting a new general journal page
Use the journal from Work Together on page 81. Your instructor will guide you through the follow-
ing examples.
Transactions: Apr. 22. Paid cash for water bill (Utilities Expense), $150.00. C7.
23. Sold services on account to Lester Dodge, $317.00. S2.
26. Received cash from sales, $1,560.00. T26.
27. Paid cash to owner for personal use, $750.00. C8.
27. Paid cash for supplies, $24.00. C9.
27. Paid cash for postage (Miscellaneous Expense), $35.00. C10.
29. Received cash on account from Lester Dodge, $75.00. R3.
30. Received cash from sales, $743.00. T30.
4. Journalize the transactions for April 22 through 27.
5. Use page 2 of the journal to journalize the remaining transactions for April.
Journalizing transactions and starting a new general journal page
Use the journal from On Your Own on page 81. Work these problems independently.
Transactions: June 23. Sold services on account to Connie Vaughn, $135.00. S2.
24. Paid cash for advertising, $48.00. C7.
25. Received cash from sales, $850.00. T25.
26. Paid cash for delivery charges (Miscellaneous Expense), $17.00. C8.
26. Received cash on account from Connie Vaughn, $100.00. R3.
26. Paid cash for postage (Miscellaneous Expense), $15.00. C9.
27. Paid cash for supplies, $21.00. C10
30. Received cash from sales, $235.00. T30.
6. Journalize the transactions for June 23 through 26.
7. Use page 2 of the journal to journalize the remaining transactions for June.
CHAPTER 4 Recording Transactions in a General Journal 85
UDIT YOUR
UNDERSTANDING
UDIT YOUR
UNDERSTANDING
A
A
N YOUR
OWN
ON YOUR
OWN
O
ORK
TOGETHER
W
ORK
TOGETHER
W
PRENUMBERED
DOCUMENTS
As one way to control the
operations of the business, a
company often will use
prenumbered documents. Such
a document is one that has the
form number printed on it in
advance. The most common
example in everyday life is the
personal check.
Businesses use several
prenumbered documents.
Examples include business
checks, sales invoices, purchase
orders, receipts, and
memorandums.
The use of prenumbered
documents allows a simple way
to ensure that all documents
are recorded. For example,
when a business records the
checks written during a period
of time, all check numbers
should be accounted for in
numeric order. The person
recording the checks must
watch to see that no numbers
are skipped. In this way,
the business is more
confident that all checks
are recorded.
By using
several types of
prenumbered
documents, the
business helps ensure
that all transactions are
properly recorded.
Another way a business
tries to control operations is
through the use of batch totals.
When many (sometimes
hundreds) of documents are
being recorded, the total
amount can be used to help
ensure that all documents are
recorded.
For example, when sales
invoices are recorded, the total
of all the invoices is calculated
prior to the invoices being
recorded. Once all invoices
are recorded, another total
can be calculated. If the
two totals are equal,
it can be assumed
that all invoices
have been recorded. If
the totals
do not equal
, it
may indicate that a document
was skipped.
Research: Contact a local
business and ask what
prenumbered documents are
used there. Determine how the
business uses the documents to
ensure that all documents are
recorded properly.
explore accounting
After completing this chapter, you can
1. Define important accounting terms related to journalizing transactions.
2. Identify accounting concepts and practices related to journalizing
transactions.
3. Record in a general journal transactions to set up a business.
4. Record in a general journal transactions to buy insurance for cash and
supplies on account.
5. Record in a general journal transactions that affect owner’s equity and
receiving cash on account.
6. Start a new journal page.
CHAPTER
SUMMARY
4
86 CHAPTER 4 Recording Transactions in a General Journal
CHAPTER 4 Recording Transactions in a General Journal 87
APPLICATION PROBLEM
Journalizing transactions into a general journal
Dennis Gilbert owns a service business called D & G Company, which uses the following accounts:
Cash Accts. Pay.—Ronken Supplies Miscellaneous Expense
Accts. Rec.—Hetland Company Dennis Gilbert, Capital Rent Expense
Supplies Dennis Gilbert, Drawing Utilities Expense
Prepaid Insurance Sales
Transactions:
Feb. 1. Received cash from owner as an investment, $10,000.00. R1.
4. Paid cash for supplies, $1,000.00. C1.
Instructions:
Journalize the transactions completed during February of the current year. Use page 1 of the journal
given in the Working Papers. Source documents are abbreviated as follows: check, C; memorandum, M;
receipt, R; sales invoice, S; calculator tape, T.
Save your work to complete Application Problem 4-2.
APPLICATION PROBLEM
Journalizing buying insurance, buying on account, and paying on account
into a general journal
Use the chart of accounts and general journal from Application Problem 4-1.
Transactions:
Feb. 6. Paid cash for insurance, $1,200.00 C2.
7. Bought supplies on account from Ronken Supplies, $1,400.00. M1.
8. Paid cash on account to Ronken Supplies, $700.00. C3.
12. Paid cash on account to Ronken Supplies, $700.00. C4.
Instructions:
Journalize the transactions. Source documents use the same abbreviations as stated in Application
Problem 4-1. Save your work to complete Application Problem 4-3.
APPLICATION PROBLEM
Journalizing transactions that affect owner’s equity into a general journal
Use the chart of accounts given in Application Problem 4-1 and general journal from Application Problem
4-2.
Transactions:
Feb. 12. Paid cash for rent, $600.00. C5.
13. Received cash from sales, $500.00. T13.
14. Sold services on account to Hetland Company, $450.00. S1.
15. Paid cash to owner for personal use, $1,800.00. C6.
18. Received cash from sales, $278.00. T18.
19. Paid cash for postage (Miscellaneous Expense), $64.00. C7.
21. Received cash an account from Hetland Company, $250.00. R2.
4-1
4-2
4-3
88 CHAPTER 4 Recording Transactions in a General Journal
Feb. 22. Received cash from sales, $342.00. T22.
22. Paid cash for heating fuel bill, $329.00. C8.
Instructions:
Journalize the transactions. Source documents use the same abbreviations as stated in Application
Problem 4-1.
Save your work to complete Application Problem 4-4.
APPLICATION PROBLEM
Journalizing transactions and starting a new page of a general journal
Use the chart of accounts given in Application Problem 4-1 and the general journal from Application
Problem 4-3.
Transactions:
Feb. 25. Received cash on account from Hetland Company, $200.00. R3.
25. Paid cash for a delivery (Miscellaneous Expense), $18.00. C9.
26 Sold services on account to Hetland Company, $136.00. S2.
26. Paid cash for supplies, $44.00. C10.
27. Paid cash for rent, $600.00. C11.
27. Paid cash for postage (Miscellaneous Expense), $10.00. C12.
28. Received cash from sales, $1,365.00. T28.
28. Paid cash to owner for personal use, $1,000.00. C13.
Instructions:
1. Journalize the transactions for February 25. Source documents use the same abbreviations as stated in
Application Problem 4-1.
2. Use page 2 of the journal to journalize the rest of the transactions for February.
APPLICATION PROBLEM
Journalizing transactions
Nick Bonnocotti owns a service business called The Lawn Doctor, which uses the following accounts:
Cash Nick Bonnocotti, Capital
Accts. Rec.—Leon Quarve Nick Bonnocotti, Drawing
Supplies Sales
Prepaid Insurance Advertising Expense
Accts. Pay.—Western Supplies Utilities Expense
Transactions:
Apr. 1. Nick Bonnocotti invested $2,000.00 of his own money in the business. Receipt No. 1.
3. Used business cash to purchase supplies costing $37.00. Wrote Check No. 1.
4. Wrote Check No. 2 for insurance, $120.00.
5. Purchased supplies for $50.00 over the phone from Western Supplies, promising to send the
check next week. Memorandum No. 1.
11. Sent Check No. 3 to Western Supplies, $50.00.
12. Sent a check for the electricity bill, $65.00. Check No. 4.
15. Wrote a $850.00 check to Mr. Bonnocotti for personal use. Used Check No. 5.
4-4
4-5
CHAPTER 4 Recording Transactions in a General Journal 89
Apr. 16. Sold services for $259.00 to Leon Quarve, who agreed to pay for them within 10 days. Sales
Invoice No. 1.
17. Recorded cash sales of $1,668.00.
18. Paid $50.00 for advertising. Wrote Check No. 6.
25. Received $259.00 from Leon Quarve for the services we performed last week. Wrote Receipt
No. 2.
Instructions:
Journalize the transactions completed during April of the current year. Use page 1 of the journal given in
the Working Papers. Remember to enter source document numbers as necessary.
MASTERY PROBLEM
Journalizing transactions
Jill Statsholt owns a service business called Jill’s Car Wash, which uses the following accounts:
Cash Accts. Pay.—Long Supplies Miscellaneous Expense
Accts. Rec.—David’s Limos Jill Statsholt, Capital Rent Expense
Supplies Jill Statsholt, Drawing Repair Expense
Prepaid Insurance Sales Utilities Expense
Accts. Pay.—Akita Supplies Advertising Expense
Transactions:
June 1. Received cash from owner as an investment, $17,500.00. R1.
2. Paid cash for rent, $400.00. C1.
3. Paid cash for supplies, $1,200.00. C2.
4. Bought supplies on account from Akita Supplies, $2,000.00. M1.
5. Paid cash for insurance, $4,500.00. C3.
8. Paid cash on account to Akita Supplies, $1,500.00. C4.
8. Received cash from sales, $750.00. T8.
8. Sold services on account to David’s Limos, $200.00. S1.
9. Paid cash for electric bill, $75.00. C5.
10. Paid cash for miscellaneous expense, $7.00. C6.
10. Received cash from sales, $750.00. T10.
11. Paid cash for repairs, $100.00. C7.
11. Received cash from sales, $850.00. T11.
12. Received cash from sales, $700.00. T12.
15. Paid cash to owner for personal use, $350.00. C8.
15. Received cash from sales, $750.00. T15.
16. Paid cash for supplies, $1,500.00. C9.
17. Received cash on account from David’s Limos, $200.00. R2.
17. Bought supplies on account from Long Supplies, $750.00. M2.
17. Received cash from sales, $600.00. T17.
18. Received cash from sales, $800.00. T18.
19. Received cash from sales, $750.00. T19.
22. Bought supplies on account from Long Supplies, $80.00. M3.
22. Received cash from sales, $700.00. T22.
23. Paid cash for advertising, $130.00. C10.
23. Sold services on account to David’s Limos, $650.00. S2.
4-6
90 CHAPTER 4 Recording Transactions in a General Journal
June 24. Paid cash for telephone bill, $60.00. C11.
24. Received cash from sales, $600.00. T24.
25. Received cash from sales, $550.00. T25.
26. Paid cash for supplies, $70.00. C12.
26. Received cash from sales, $600.00. T26.
29. Received cash on account from David’s Limos, $650.00. R3.
30. Paid cash to owner for personal use, $375.00. C13.
30. Received cash from sales, $800.00. T30.
Instructions:
1. The journals for Jill’s Car Wash are given in the Working Papers. Use page 1 of the journal to
journalize the transactions for June 1 through June 16. Source documents are abbreviated as follows:
check, C; memorandum, M; receipt, R; sales invoice, S; calculator tape, T.
2. Use page 2 of the journal to journalize the transactions for the remainder of June.
CHALLENGE PROBLEM
Journalizing transactions using a variation of the general journal
Tony Wirth owns a service business called Wirth’s Tailors, which uses the following accounts:
Cash Accts. Pay.—Marker Supplies Rent Expense
Accts. Rec.—Amy’s Uniforms Tony Wirth, Capital Utilities Expense
Supplies Tony Wirth, Drawing
Prepaid Insurance Sales
Transactions:
June 1. Received cash from owner as an investment, $17,000.00. R1.
2. Paid cash for insurance, $3,000.00. C1.
3. Bought supplies on account from Marker Supplies, $2,500.00. M1.
4. Paid cash for supplies, $1,400.00. C2.
8. Paid cash on account to Marker Supplies, $1,300.00. C3.
9. Paid cash for rent, $800.00. C4.
12. Received cash from sales, $550.00. T12.
15. Sold services on account to Amy’s Uniforms, $300.00. S1.
16. Paid cash for telephone bill, $70.00. C5.
22. Received cash on account from Amy’s Uniforms, $300.00. R2.
25. Paid cash to owner for personal use, $900.00. C6.
Instructions:
The journal for Wirth’s Tailors is given in the Working Papers. Wirth’s Tailors uses a journal that is slightly
different from the journal used in this chapter. Use page 1 of the journal to journalize the transactions.
Source documents are abbreviated as follows: check, C; memorandum, M; receipt, R; sales invoice, S;
calculator tape, T.
4-7
CHAPTER 4 Recording Transactions in a General Journal 91
During the summer, Willard Kelly does odd jobs to earn money. Mr. Kelly keeps
all his money in a single checking account. He writes checks to pay for personal
items and for business expenses. These payments include personal clothing,
school supplies, gasoline for his car, and recreation. Mr. Kelly uses his check stubs as his
accounting records. Are Mr. Kelly’s accounting procedures and records correct? Explain
your answer.
INTERNET ACTIVITY
Applied Communication
Careful research about careers will help prepare you
for making career choices. There are several U.S.
government publications that provide detailed
descriptions of many job titles. Two that are available
in most public libraries are the Dictionary of
Occupational Titles (DOT) and the Occupational Outlook
Handbook.
Instructions: Go to the library and, using one of the
two publications listed or any other appropriate
resource, find the description for any accounting-
related job. Record information you find, such as qual-
ifications needed, job outlook, and earnings. Write one
paragraph describing the pros and cons of working in
such a job. Be sure to write a topic sentence and a
conclusion.
Point your browser to
http://accounting.swpco.com
Choose First-Year Course, choose
Activities, and complete the activity
for Chapter 4.
General Journal
A journal with two amount
columns in which all kinds of
entries can be recorded is
called a general journal.
General journal entries are
entered in the automated
accounting system through the
General Journal tab. In a later
chapter, special journals will be
discussed to instruct you on how
to use the other journals on the
Journal Entries screen for spe-
cific types of transactions. The
other tabs on the Journal Entries
screen are used for entering
purchases, cash payments, cash
receipts, and sales.
In an automated accounting
system, the transactions that are
entered and posted in the gen-
eral journal update ledger
account balances immediately.
For verification purposes, a
general ledger report can be
displayed or printed to prove
account balances.
Recording Transactions
in the General Journal
Screen
Entering general journal
entries can be done in five
steps.
1. Enter the date of the
transaction, then press the
Tab key.
2. Enter the source document
number in the Reference col-
umn, then press the Tab key.
3. Enter the account number to
be debited, then press the
Tab key. The account title
will be displayed at the bot-
tom of the general journal,
just above the command
buttons. (In Automated
Accounting 8.0, the account
title is displayed next to the
account number after
tabbing to the next column.
4. Enter the debit amount, then
press the Tab key twice. The
cursor will automaticaly
position itself in the Account
Number field on the next
line of the journal. Enter the
account number to be cred-
ited, press the Tab key twice,
then enter the credit amount.
A
UTOMATED
A
CCOUNTING
RECORDING TRANSACTIONS
92 CHAPTER 4 Recording Transactions in a General Journal
5. When the transaction is
complete, click the Post but-
ton. Posting will be
discussed in Chapter 5.
General Journal
Transaction Additions,
Changes, and Deletions
If you wish to add a part of
a transaction, select the journal
entry transaction to which you
want to add a debit or credit.
Click on the Insert button. When
the blank line appears, enter the
additional transaction debit or
credit and click the Post button.
When changing or deleting
general journal transactions,
you need to select any portion
of the desired transaction. Make
corrections to the entry, then
click the Post button. If you wish
to delete the transaction, click
the Delete button.
General Journal Report
In this section you will learn
how to generate journal reports
and specify which journal
entries are to appear in the jour-
nal report. The general journal
report will display or print the
general journal entries that were
posted for a specified period.
Reports are useful in detecting
errors and verifying that debits
and credits are equal.
A general journal report can
be generated in three steps:
1. Choose the Report Selection
menu item from the Reports
menu or click the Reports
toolbar button.
2. When the Report Selection
window appears, choose the
Journals option. To change
the run date, shown in the
upper right corner of the
screen, enter the desired
date or use the key to
increase and the key to
decrease the date. You may
also click on the calendar.
3. Select the General Journal
report, then click the OK
button. You can choose to
include all general journal
entries or to customize your
report.
AUTOMATING
APPLICATION PROBLEM
4-5: Journalizing trans-
actions
Instructions:
1. Load Automated Accounting
7.0 or higher software.
2. Select database F04-1 from
the appropriate directory/
folder.
3. Select File from the menu
bar and choose the Save As
menu command. Key the
path to the drive and direc-
tory that contains your data
files. Save the database with
a file name of XXX041
(where XXX are your
initials). (Automated
Accounting 8.0 allows long
file names. Your instructor
may direct you to use your
full name when saving your
files.)
4. Access Problem Instructions
through the Help menu.
Read the Problem
Instructions screen. (In
Automated Accounting 8.0,
Problem Instructions are
accessed by clicking the
Browser toolbar button.)
5. Key the transactions listed
on pages 90–91.
6. Exit the Automated
Accounting software.
AUTOMATING MASTERY
PROBLEM 4-6:
Journalizing
transactions and
proving and ruling a
journal
Instructions:
1. Load Automated Accounting
7.0 or higher software.
2. Select database F04-2 from
the appropriate directory/
folder.
3. Select File from the menu
bar and choose the Save As
menu command. Key the
path to the drive and direc-
tory that contains your data
files. Save the database with
a file name of XXX042
(where XXX are your
initials). (Automated
Accounting 8.0 allows long
file names. Your instructor
may direct you to use your
full name when saving your
files.)
4. Access Problem Instructions
through the Help menu.
Read the Problem
Instructions screen. (In
Automated Accounting 8.0,
Problem Instructions are
accessed by clicking the
Browser toolbar button.)
5. Key the transactions listed
on pages 91–92.
6. Exit the Automated
Accounting software.
A
UTOMATED
A
CCOUNTING
CHAPTER 4 Recording Transactions in a General Journal 93

Navigation menu