1. Learning Objectives © 2014 Cengage Learning. All Rights Reserved. LO1 Define what a journal is and explain why it is used to record transactions. LO2 Compare and contrast different types of source documents. LO3 Identify the four parts of a journal entry.

2. © 2014 Cengage Learning. All Rights Reserved. Journals and Journalizing ●A form for recording transactions in chronological order (by date) is called a journal. ●Recording transactions in a journal is called journalizing. SLIDE 2 Lesson 3-1 LO1

3. © 2014 Cengage Learning. All Rights Reserved. A Multicolumn Journal ●Promotes accuracy in record keeping ●Provides a chronological record ●Uses Double-entry accounting ●Information for each transaction recorded in a journal is called an entry. ●The recording of debit and credit parts of a transaction is called double-entry accounting. ●Each transaction affects at least two accounts. SLIDE 3 LO1 Lesson 3-1

4. © 2014 Cengage Learning. All Rights Reserved. Objective Evidence ●A business paper from which information is obtained for a journal entry is called a source document. ●The accounting concept Objective Evidence is being applied when a source document is prepared for each transaction. SLIDE 4 LO2 Lesson 3-1

5. © 2014 Cengage Learning. All Rights Reserved. A Source Document (Objective Evidence) ●A business form ordering a bank to pay cash from a bank account is called a check. ●A check is the source document for all cash payments. SLIDE 5 LO2 Lesson 3-1

6. © 2014 Cengage Learning. All Rights Reserved. Another Source Document (Objective Evidence) ●An invoice used as a source document for recording a sale on account is called a sales invoice. ●A sales invoice is also referred to as a sales ticket or a sales slip. SLIDE 6 LO2 Lesson 3-1

7. © 2014 Cengage Learning. All Rights Reserved. Another Source Document (Objective Evidence) ●A business form giving written acknowledgement for cash received is called a receipt. ●A receipt is the source document for all cash received from transactions other than cash sales. SLIDE 7 LO2 Lesson 3-1

8. © 2014 Cengage Learning. All Rights Reserved. Another Source Document (Objective Evidence) ●A form on which a brief message is written to describe a transaction is called a memorandum. ●A memo is the source document used when supplies are bought on account, to keep it easily obvious when journalizing that supplies were purchased on account so they don’t get mixed up and recorded as merchandise purchased on account. SLIDE 8 LO2 Lesson 3-1

9. © 2014 Cengage Learning. All Rights Reserved. Calculator Tapes SLIDE 9 LO2 Lesson 3-1 Calculator Tapes are used as a source document (Objective Evidence) for all cash sales.

10. © 2014 Cengage Learning. All Rights Reserved. Received Cash from Owner as an Investment SLIDE 10 LO3 Lesson 3-1 January 2. Received cash from owner as an investment, $2,000.00. Receipt No. 1. Cash 2,000.00 Michael Delgado, Capital 2,000.00 Note: This entry requires a general credit and a cash debit.

11. © 2014 Cengage Learning. All Rights Reserved. Paid Cash for Supplies SLIDE 11 January 2. Paid cash for supplies, $165.00. Check No. 1. Supplies 165.00 Cash 165.00 When an entry in an amount column is an even dollar amount, you must enter “00” in the cents column. Lesson 3-1 LO3

12. © 2014 Cengage Learning. All Rights Reserved. Learning Objectives © 2014 Cengage Learning. All Rights Reserved. LO4Analyze and record cash transactions using source documents. LO5Analyze and record transactions for buying and paying on account.

13. © 2014 Cengage Learning. All Rights Reserved. Paid Cash for Insurance SLIDE 13 LO4 Lesson 3-2 January 3. Paid cash for insurance, $900.00. Check No. 2. Prepaid Insurance 900.00 Cash 900.00 The balance of the Prepaid Insurance account is increased.

14. © 2014 Cengage Learning. All Rights Reserved. Bought Supplies on Account SLIDE 14 LO5 Lesson 3-2 January 5. Bought supplies on account from Canyon Office Supplies, $220.00. Memorandum No. 1. Supplies 220.00 Accounts Payable—Canyon Office Supplies 220.00 On each journal entry, the date is written for each entry.

15. © 2014 Cengage Learning. All Rights Reserved. Paid Cash on Account SLIDE 15 January 9. Paid cash on account to Canyon Office Supplies, $100.00. Check No. 3. Accounts Payable—Canyon Office Supplies 100.00 Cash 100.00 LO5 Lesson 3-2

16. © 2014 Cengage Learning. All Rights Reserved. Learning Objectives © 2014 Cengage Learning. All Rights Reserved. LO6Analyze and record transactions that affect owner’s equity. LO7Analyze and record sales and receipt of cash on account.

17. © 2014 Cengage Learning. All Rights Reserved. Received Cash from Sales SLIDE 17 LO6 Lesson 3-3 January 10. Received cash from sales, $1,100.00. Calculator Tape No. 10. Cash 1,100.00 Sales 1,100.00 Cash debit and sales credit (Uses two special amount columns.)

18. © 2014 Cengage Learning. All Rights Reserved. Sold Services on Account SLIDE 18 January 12. Sold services on account to Main Street Services, $500.00. Sales Invoice No. 1. Sales 500.00 Accounts Rec.—Main Street Services LO7 Lesson 3-3

19. © 2014 Cengage Learning. All Rights Reserved. Paid Cash for an Expense SLIDE 19 January 12. Paid cash for communications bill including cell phone and Internet services, $80.00. Check No. 4. Communications Expense 80.00 Cash 80.00 LO7 Lesson 3-3 General debit and a cash credit.

20. © 2014 Cengage Learning. All Rights Reserved. January 16. Received cash on account from Main Street Services, $200.00. Receipt No. 2. Received Cash on Account SLIDE 20 Cash 200.00 Accounts Receivable—Main Street Services 200.00 LO7 Lesson 3-3

21. © 2014 Cengage Learning. All Rights Reserved. Paid Cash to Owner as Withdrawal of Equity SLIDE 21 January 16. Paid cash to owner for a withdrawal of equity, $350.00. Check No. 6. Michael Delgado, Drawing 350.00 Cash 350.00 LO7 Lesson 3-3 Paying cash to the owner requires a General Debit and a Cash Credit.

22. © 2014 Cengage Learning. All Rights Reserved. Learning Objectives © 2014 Cengage Learning. All Rights Reserved. LO8 Prove and rule a journal. LO9 Demonstrate how to prove cash. LO10 Identify and correct errors using standard accounting practices.

23. © 2014 Cengage Learning. All Rights Reserved. Starting a New Journal Page Lesson 3-4 LO8

24. © 2014 Cengage Learning. All Rights Reserved. Proving and Ruling a Journal at the End of a Month SLIDE 24 Lesson 3-4 LO8 The single ruled line across the journal amount columns indicates that the columns are to be totaled. Ruled double lines indicate that the amounts are totals and that the sum of the debit totals equals the sum of the credit totals.

25. © 2014 Cengage Learning. All Rights Reserved. Proving and Ruling a Journal at the End of a Month SLIDE 25 Lesson 3-4 LO8 ColumnDebit Column TotalCredit Column Total General5,748.00$2,525.00 Sales5,820.00 Cash7,120.004,523.00 Totals$12,868.00 Totals equal

26. © 2014 Cengage Learning. All Rights Reserved. Checking for Accuracy ●Determining that the amount of cash agrees with the accounting records is called proving cash. ●Cash can be proved whenever needed, but it is always done at the end of the month. SLIDE 26 LO9 Lesson 3-4

27. © 2014 Cengage Learning. All Rights Reserved. Proving Cash SLIDE 27 LO9 1. 1.Calculate the cash balance. Cash on hand at the beginning of the month$0.00 Plus total cash received during the month+7,120.00 Equals total$7,120.00 Less total cash paid during the month–4,523.00 Equals cash balance at the end of the month$2,597.00 2. 2.Verify that the cash balance equals the checkbook balance on the next unused check stub in the checkbook. Checkbook balance on the next unused check stub$2,597.00 Lesson 3-4

28. © 2014 Cengage Learning. All Rights Reserved. Correcting Errors in Journal Entries Note: Do not erase because journal entries are considered permanent records. SLIDE 28 Lesson 3-4 LO10 2.All corrections for posting errors should be made in a way that leaves no question as to the correct amount. 1. 1.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 2 3 3 1 1

29. © 2014 Cengage Learning. All Rights Reserved. SLIDE 29