The General Journal BAF3M

General Journal Records all parts of a transaction in one place The date, the debit, the credit, and an explanation for each transaction are recorded together Why? What if a mistake was made? An accountant/bookkeeper would have to go through all the accounts until the error is found

General Journal Sometimes called a “book of original entry” because it is where transaction are first recorded. Transactions are recorded chronologically, the order in which they take place Therefore, transactions are very easy to locate

Journal Entries Each transaction recorded in a journal is called a journal entry The process of recording transactions in a journal is called journalizing Each journal entry has 4 parts: The date of the transaction The account debited, and the amount The account credited (indented), and the amount An explanation or description giving the details of the transaction

Journal Entry - Example See page 110, Figure 4-1

Step 1: Record the Date The first entry on each page must show: The year The month The day Only the day of the month needs to be recorded for other entries on the page, unless the month changes before a page is completed When a new page is started, the first entry must continue to show the year, month, and day.

Step 2: Record the Debit The name of account debited is written next to the date. The $ amount is recorded in the debit column Similar to the trial balance The Debit(s) must come BEFORE the Credit(s)

Step 3: Record the Credit The credit is recorded on the next line and is indented It is to visually organize the debits from the credits The $ amount is recorded in the credit column

Step 4: Explanation/Description On the next line (not indented), an explanation of the transaction is written Use as few words as possible to describe the transaction Include only important information such as: company name, invoice # or cheque #

Advantage of the Journal The complete transaction is recorded in one place Therefore, errors are easier to spot It is very easy to see if DR = CR by simply looking at the columns Shows a chronological history of business transactions Can be easier to identify busy periods, or determine daily/weekly/monthly volume and amounts