1. JOURNALIZING AND POSTING TRANSACTIONS
CHAPTER THREE
JOURNALIZING AND POSTING TRANSACTIONS

2. Analyze transactions using
FLOW OF DATA
STEP #1
INPUT
Analyze transactions using
SOURCE DOCUMENTS and CHART OF ACCOUNTS

3. FLOW OF DATA PROCESSING “Journalizing” “Posting”
Enter business transactions in the
Post the entries in the journal to the
From the general ledger, prepare a
General Journal
General Ledger
Trial Balance
“Journalizing”
“Posting”
STEP #2
STEP #3
STEP #4
ST #2

4. CHART OF ACCOUNTS A list of ALL accounts used by a business
In numeric order
Used to determine which accounts are affected by a given transaction

5. JESSICA JANE’S CAMPUS DELIVERY CHART OF ACCOUNTS
Assets ( )
Cash
Accts. Rec.
Supplies
Prepaid Ins.
Delivery Eq.
Assets begin with 1

6. JESSICA JANE’S CAMPUS DELIVERY CHART OF ACCOUNTS
Assets ( )
Cash
Accts. Rec.
Supplies
Prepaid Ins.
Delivery Eq.
Liabilities ( )
Accounts Pay.
Liabilities begin with 2

7. JESSICA JANE’S CAMPUS DELIVERY CHART OF ACCOUNTS
Assets ( )
Cash
Accts. Rec.
Supplies
Prepaid Ins.
Delivery Eq.
Liabilities ( )
Accounts Pay.
Owner’s Eq. ( )
Jessica Jane, Capital
Jessica Jane, Drawing
Owner’s Equity begins with 3

8. JESSICA JANE’S CAMPUS DELIVERY CHART OF ACCOUNTS
Assets ( ) Revenues ( )
Cash Delivery Fees
Accts. Rec.
Supplies
Prepaid Ins.
Delivery Eq.
Liabilities ( )
Accounts Pay.
Owner’s Eq. ( )
Jessica Jane, Capital
Jessica Jane, Drawing
Revenues begin with 4

9. JESSICA JANE’S CAMPUS DELIVERY CHART OF ACCOUNTS
Assets ( ) Revenues ( )
Cash Delivery Fees
Accts. Rec.
Supplies Expenses ( )
Prepaid Ins Wages Exp.
Delivery Eq Rent Exp.
525 Tele. Exp.
Liabilities ( )
Accounts Pay.
Owner’s Eq. ( )
Jessica Jane, Capital
Jessica Jane, Drawing
Expenses begin with 5

10. JESSICA JANE’S CAMPUS DELIVERY CHART OF ACCOUNTS
Assets ( ) Revenues ( )
Cash Delivery Fees
Accts. Rec.
Supplies Expenses ( )
Prepaid Ins Wages Exp.
Delivery Eq Rent Exp.
525 Tele. Exp.
Liabilities ( )
Accounts Pay.
Owner’s Eq. ( )
Jessica Jane, Capital
Jessica Jane, Drawing
This here’s my prize asset! So’s I knows it would start with the #1 on my chart of accounts!

11. SOURCE DOCUMENTS Trigger the analysis of what happened
Begin the process of entering transactions in the accounting system
Serve as objective evidence of business transactions
Filed for possible future reference

12. SOURCE DOCUMENTS Check stubs or copies of checks Cash Payments
Example: Provides Information about:
Check stubs or copies of checks
Cash Payments
Receipt stubs, copies of receipts, cash register tapes, or memos of cash register totals
Cash Receipts

13. JOURNAL Day by day listing of financial transactions
Purpose: to provide a record of all transactions
“Book of Original Entry”
Simplest form - “General Journal”
Act of entering transaction in Journal is called “Journalizing”
Very important term!

14. Mica Pearl invested $25,000 in the business on June 1, 20XX
EXAMPLE:
Mica Pearl invested $25,000 in the business on June 1, 20XX
NEW!
DATED
TRANSACTIONS

15. Assets = Liabilities + Owner’s Equity
CASH
M. Pearl, Capital
DR.
CR.
DR.
CR. + +
NOW WE WILL
“JOURNALIZE”
THIS TRANSACTION
$25,000
$25,000

16. GENERAL JOURNAL STEP #1 ENTER DATE (Year and month only written on
DEBIT PR
CREDIT
DATE
DESCRIPTION
20XX 1
JUNE 1 2
STEP #1
ENTER DATE
(Year and month only written on
first line of each page unless the month
changes)

17. GENERAL JOURNAL Cash DEBIT PR CREDIT DATE DESCRIPTION 20XX 1 JUNE 1 2
Step #2
Enter the name of the account being debited FIRST.
(Account name should be flush against the date line.

18. GENERAL JOURNAL Cash STEP #3 DATE DESCRIPTION DEBIT PR CREDIT 20XX 1
JUNE 1 2
STEP #3
ENTER THE AMOUNT
OF THE DEBIT.
(Don’t use $ signs)

19. (Indent ¼ to ½ inch and on next line)
GENERAL JOURNAL
DEBIT PR
CREDIT
DATE
DESCRIPTION
20XX 1
Cash
JUNE 1 2
M. Pearl, Capital
STEP #4
(Indent ¼ to ½ inch and on next line)
Enter the account
To be credited and
dollar amount.

20. On next line, indent a small amount and
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT
20XX 1
Cash
JUNE 1 2
M. Pearl, Capital 3
(Owner’s original investment in business) 4
STEP #5
On next line, indent a small amount and
ENTER AN EXPLANATION

21. GENERAL JOURNAL Cash M. Pearl, Capital STEP #6 SKIP A LINE! DEBIT PR
CREDIT
DATE
DESCRIPTION
20XX 1
Cash
JUNE 1 2
M. Pearl, Capital 3
(Owner’s original investment in business) 4
Yikes, I don’t want to forget to skip a line between journal entries!
That would be like forgetting my slice of cheese! 5
STEP #6
SKIP A LINE!
(Leave a blank line
between transactions)

22. Okay, I get it, a compound entry is more than 2 accounts. . .right?!
An entry requiring more than one debit and/or more than one credit
All debits come before any credits!
Okay, I get it, a compound entry is more than 2 accounts. . .right?!

23. COMPOUND ENTRY EXAMPLE:
Mica purchased $2,500 of office equipment, (including a pink computer) and $500 of office supplies for cash on June 10.

24. “T” ACCOUNT ANALYSIS + + + All Asset Accounts! OFFICE EQUIP.
0FFICE SUPPLIES
DR.
CR.
DR.
CR. + +
CASH
DR.
CR.
All Asset Accounts! +

25. PURCHASED $2,500 OF OFFICE EQUIPMENT AND $500 OF OFFICE SUPPLIES FOR CASH ON JUNE 10.
What are the accounts affected??
Which are increased and which are decreased?

26. This account increased!
PURCHASED $2,500 OF OFFICE EQUIPMENT AND $500 OF OFFICE SUPPLIES FOR CASH ON JUNE 10.
OFFICE EQUIPMENT
Dr.
Cr. +
$2,500
This account increased!

27. This account increased too! ( it must be a conspiracy. . .)
PURCHASED $2,500 OF OFFICE EQUIPMENT AND $500 OF OFFICE SUPPLIES FOR CASH ON JUNE 10.
OFFICE SUPPLIES
Dr.
Cr. +
$500
This account increased too!
( it must be a conspiracy. . .)

28. Ahaa. . .This account decreased!
PURCHASED $2,500 OF OFFICE EQUIPMENT AND $500 OF OFFICE SUPPLIES FOR CASH ON JUNE 10.
CASH
Dr.
Cr. +
$3,000
Ahaa. . .This account decreased!

29. 2 DEBITS & 1 CREDIT BUT DEBIT $ = CREDIT $
OFFICE EQUIP.
0FFICE SUPPLIES
DR.
CR.
DR.
CR. + +
$500
$2,500
CASH
DR.
CR. +
$3,000

30. NOW LET’S JOURNALIZE THE TRANSACTION
Yahoo! I love journalizing!

31. GENERAL JOURNAL The order of the debits does not
DATE
DESCRIPTION
DEBIT PR
CREDIT
2014 1
Office Equipment
JUNE 10 2
Office Supplies 3
Cash 4
(Purchased office equip. and 5
Supplies)
The order of the debits does not
matter. But ALL debits must
come before any credits.

32. GENERAL LEDGER Set of all accounts used by a business.
Similar to “T” accounts.
Used to keep record of current balances and all activity within accounts.
Commonly in form of FOUR-COLUMN account.

33. T-accounts are used in the classroom but they are not used in real life. Instead, businesses use a General Ledger!
CASH
DR.
CR.
$3,000 +
Instead of this, business’s use this. . .
Notice the “T” in the 4-column account is used just like our T-account

34. POSTING
Process of copying debits and credits from the journal to the ledger
Done daily or at frequent intervals
Five step process. . .

35. Let’s post this entry to the
GENERAL JOURNAL
DEBIT PR
CREDIT
DATE
DESCRIPTION
20XX 1
Cash
JUNE 1 2
M. Pearl, Capital 3
(Owner’s original 4
investment in business) 5
Let’s post this entry to the
GENERAL LEDGER

36. FOUR-COLUMN ACCOUNT 101 CASH EACH ACCOUNT ACCOUNT IS NUMBERED NAME
Account No.
Account:
BALANCE
DATE
ITEM PR
DR.
CR.
DR.
CR.
EACH ACCOUNT
IS NUMBERED
ACCOUNT
NAME

37. FOUR-COLUMN ACCOUNT 101 CASH STEP #1 RECORD DATE Year and Month
Account No.
Account:
BALANCE
DATE
ITEM PR
DR.
CR.
DR.
CR.
20XX
June 1
STEP #1
RECORD DATE
Year and Month
only for first entry

38. FOUR-COLUMN ACCOUNT 101 CASH LEAVE “ITEM” AREA BLANK Used for special
Account No.
Account:
BALANCE
DATE
ITEM PR
DR.
CR.
DR.
CR.
20XX
June 1
LEAVE “ITEM”
AREA BLANK
Used for special
transaction only

39. FOUR-COLUMN ACCOUNT 101 CASH STEP #2 ENTER AMOUNT 25,000 Account No.
BALANCE
DATE
ITEM PR
DR.
CR.
DR.
CR.
20XX
June 1
25,000
STEP #2
ENTER AMOUNT

40. FOUR-COLUMN ACCOUNT 101 CASH STEP #3 ENTER NEW BALANCE 25,000 25,000
Account No.
Account:
BALANCE
DATE
ITEM PR
DR.
CR.
DR.
CR.
20XX
June 1
25,000
25,000
STEP #3
ENTER NEW BALANCE

41. “J” for journal and 1 for page 1
FOUR-COLUMN ACCOUNT
101
CASH
Account No.
Account:
BALANCE
DATE
ITEM PR
DR.
CR.
DR.
CR.
20XX
June 1 J1
25,000
25,000
STEP #4
ENTER JOURNAL
PAGE NUMBER
“J” for journal and 1 for page 1

42. Posting Reference (PR) column
GENERAL JOURNAL
DEBIT PR
CREDIT
DATE
DESCRIPTION
2010 1
Cash
JUNE 1
101 2
M. Pearl, Capital 3
(Owner’s original 4
investment in business) 5
STEP #5
ENTER THE LEDGER
ACCOUNT NUMBER in the
Posting Reference (PR) column

43. TRIAL BALANCE
Used to prove equality of debits and credits in the ledger accounts
Can be prepared daily, weekly, monthly or whenever desired
Prepared after all transactions have been journalized and posted

44. Jessica Jane’s Campus Delivery Trial Balance June 30, 20--
Now with Account Numbers
Account Title
Acct No.
Debit Balance
Credit Balance
Cash
101
Accounts Receivable
122
Supplies
141
80 00
Prepaid Insurance
145
Delivery Equipment
185
Accounts Payable
202
Jessica Jane, Capital
311
Jessica Jane, Drawing
312
Delivery Fees
401
Wages Expense
511
Rent Expense
521
Telephone Expense
525
50 00

45. FINDING AND CORRECTING ERRORS IN THE Trial Balance

46. Sloppy Steve’s Trial Balance December 31, 20--
Account Title
Acct No.
Debit Balance
Credit Balance
Cash
101
Accounts Receivable
122
Supplies
141
Prepaid Insurance
145
Office Equipment
185
Accounts Payable
202
Steve, Capital
311
Help! My Trial Balance doesn’t balance!!!
Steve, Drawing
312
Delivery Fees
401
511
Rent Expense
521
Telephone Expense
525
70 00

47. STEP #1 Double check your addition Review balances:
See if any are too large or small, relative to other accounts
Or entered in the wrong column

48. Perhaps I forgot to post the debit or credit part of that transaction?
STEP #2
Find difference between the debits and the credits
Is difference the amount of a specific transaction?
Perhaps I forgot to post the debit or credit part of that transaction?

49. STEP #2 Divide the difference by 2
Is this number the amount of a specific transaction?

50. STEP #2
Did I post the debit or credit twice, OR, post the debit as a credit or vice versa

51. STEP #2 Divide the difference by 9
If difference is divisible by 9, you could have a SLIDE error or a TRANSPOSITION error

52. SLIDE ERRORS Occur when the decimal point is “slid” right or left
For example:
Amount was $250, but recorded as $25
Difference of $225
Difference is divisible by 9 ($225/9=25)

53. TRANSPOSITION ERRORS Occurs when two digits are reversed For example:
Amount was $520, but recorded as $250
Difference is $270 ($520-$250)
Difference is divisible by 9, ($270/9=30)

54. STEP #3 If steps #1 and #2 don’t work:
Double check your addition in the ledger accounts
Trace all postings