Section 2Recording Transactions in the General Journal What You’ll Learn  The purpose of a general journal.  The parts and labeling of a general journal.

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Presentation transcript:

Section 2Recording Transactions in the General Journal What You’ll Learn  The purpose of a general journal.  The parts and labeling of a general journal.  How information is entered in a general journal.  How to correct errors in a general journal. What You’ll Learn  The purpose of a general journal.  The parts and labeling of a general journal.  How information is entered in a general journal.  How to correct errors in a general journal.

Why It’s Important The general journal is a permanent record of the financial transactions of a business. Why It’s Important The general journal is a permanent record of the financial transactions of a business. Section 2Recording Transactions in the General Journal (con’t.) Key Terms  general journal Key Terms  general journal

Recording a General Journal Entry The general journal is an all purpose journal in which all the transactions of a business may be recorded. Recording a General Journal Entry The general journal is an all purpose journal in which all the transactions of a business may be recorded. Section 2Recording Transactions in the General Journal (con’t.) 1 Date of the 2 Name of the account transaction debited 3 Amount of the debit 1 Date of the 2 Name of the account transaction debited 3 Amount of the debit 4 Name of the 6 Source document 5 Amount of the credit account credited reference or an explanation 4 Name of the 6 Source document 5 Amount of the credit account credited reference or an explanation

Business Transaction ANALYSIS Identify1.Identify the accounts affected. Classify2.Classify the accounts affected. + / –3.Determine the amount of the increase or decrease for each account affected. BUSINESS TRANSACTION ANALYSIS Recording a General Journal Entry (con’t.) Section 2Recording Transactions in the General Journal (con’t.)

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.)

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.)

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.)

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.)

Business Transaction 1 (con’t.) DEBIT-CREDIT RULE 4.Increases in asset accounts are recorded as debits. Debit Cash in Bank for $25, 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.)

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.)

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.)

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.)

Business Transaction 4 (con’t.) DEBIT-CREDIT RULE 4.Increases in asset accounts are recorded as debits. Debit Delivery Equipment for $12, 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.)

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.)

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.)

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.)

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.)