1. The Journal and the Ledger
Chapter 4
The Journal and the Ledger

2. General Journal
Fills the need to record all parts of a transaction in one place
Includes date, debit, credit and brief explanation
Advantages:
Fewer errors
Easy to check all debit and credit entries made
Chronological order
Gives idea of volume of business
Convenient picture of day’s business

3. The General Journal What is the General Journal?
It is like an “Accounting Diary” in where all the transactions are first recorded in the order of their occurrence.
Purpose
Provides continuous record of the accounting entries as they occur
Organizes transactions and ensures that each entry balances
Provides a reference for verifying transactions

4. The General Journal Journalizing Journal Entry
The process of recording accounting entries in the General Journal
Journal Entry
The complete accounting entry for a transaction written in the journal (2 or more accounts are affected)

5. The General Journal K. Dub Lip Singing General Journal Page 1
Date
Particulars PR
Debit
Credit 1  2 1 3
1st – Enter the date
2nd – Enter the account (s) to be debited and the corresponding amount
Mar 18
Cash
500
Capital, K. Dub
500
Opened a Lip Singing Business
4th – Write a brief explanation
3rd -Enter the account (s) to be credited and the corresponding amount Particular must be indented!

6. General Ledger Provides a balance for each account
Records the debit and credit entries from the journal for every transaction
Useful for creating financial statements
Posting is the process of transferring transaction info from journal to ledger

7. Chart of Accounts List of ledger accounts by name and number
Numbers save time and increase accuracy
Sample numbering system:
Assets
Liabilities
Owner Equity
Revenue
Expenses

8. Ledger Hints & Tips Particulars column rarely used
Exception: “opening entry”
Exception: when copying balance from end of a page … “forward”
Dr/Cr column states balance of the account and not nature of entry
Place a √ in P.R. column when forwarding

9. Up until now
You have learned:
A = L OE
Normal Bal Dr Cr Cr
To Increase Dr Cr Cr
To Decrease Cr Dr Dr
(You will Dr/Cr Owners Equity (OE) based its effect on Capital)
Notice a Pattern?
These Decrease OE
Capital (+) Cr
These Increase OE
Drawings (-) Dr
Revenue (+) Cr
Expenses (-) Dr
This occurs because Capital has normally a Credit Balance

10. Tarantino Break Dancing Co.
We’ve Learned
Tarantino Break Dancing Co.
 Trial Balance
March 18, 2008 
Accounts
Acc.
No.
Debits
Credits
Cash 
1000 
Receivable. 
  500
Accts. Pay.
300 
Capital
1500 
Sales 
350 
Rent
Expense 
 650
Totals
2150 
 2150
How to do a
trial balance
All the balances of every account are listed as either a Dr or Cr

11. We’ve Learned Financial Statements
1st = Income Statement
Revenue–Expenses
= Net Income (Loss)
2nd = Balance Sheet
Assets, Liabilities, and Owners Equity.
Report Form A = L + OE
Ending Capital = Beginning Capital + NI - Drawings
Need NI to calculate Ending Capital

12. Posting to the General Ledger
Up until this point, we used T-Accounts.
This is where all the transactions from the General Journal get “Posted” to each individual account (Cash, Accounts Payable, Sales, Advertising Expense)….and the list goes on depending on your company!

13. Chart of Accounts
The numbers are used for identification.
Since we are going to be “Posting”, we need to reference all of our accounts.
Assets
Liabilities
Capital (including Drawings)
Revenues
Expenses

14. Recall from the General Journal!
Notice we’re on Page 1. You’ll need this info later!
Recall from the General Journal!
General Journal 
K. Dub Lip Singing 
 Page 1
Date
Particulars
P.R.
Debit
Credit 1
Mar
18 
 Cash
500 2
  Capital, K. Dub
500  3
Opening Balance. Lip Singing Company 
This stands for Posting Reference. It is to show you which Chart of Account # match up with
101
301

15. General Ledger This is the Page # of the General Journal
This is your running balance. You update this after every entry
General Ledger
K. Dub Lip Singing 
Account: Cash
Date
Particulars
P.R.
Debit
Credit
DR/CR
Balance 1 2 3
General Ledger
K. Dub Lip Singing 
Account: Cash
Date
Particulars
P.R.
Debit
Credit
DR/CR
Balance 1 2 3
Notice these!
Chart of Account #
Opening Entry
Opening Entry Dr
500 J1
500
Mar 18 18 19
Bought Mic. J1
100 Dr

16. Forwarding is the process of continuing an account on the next page by carrying forward all relevant information
General Ledger Cont.
General Ledger
K. Dub Lip Singing 
Account: Capital, K.Dub
Date
Particulars
P.R.
Debit
Credit
DR/CR
Balance 1 2
If you were “Forwarding” , you would type that here.
Mar Opening Bal. J Cr

17. General Ledger Cont. Mar 18 Bought a Mic. J1 100 Dr 100 General Ledger
K. Dub Lip Singing 
Account: Equipment
Date
Particulars
P.R.
Debit
Credit
DR/CR
Balance 1 2
Mar Bought a Mic. J Dr

18. How to spot Potential Errors!
Journalizing Errors
Forget to record transaction
Record entries into wrong accounts
Record entries as incorrect debits or credits
Record the wrong amount or transpose figures (eg. 97 instead of 79)
Analyze transactions incorrectly

19. Potential Errors Cont. Posting Errors from Journal to Ledger
Forget to post the entire transaction
Forget to post either the debit or credit side of the transaction
Post entry to the wrong side of the account
Post entry to the wrong account, correct side
Transposition error

20. Potential Errors Cont. Ledger to Trial Balance
Calculate account balances incorrectly in the Ledger
Forget to transfer account to the Trial Balance
Record wrong amount on the Trial Balance
Record account on wrong side of the Trial Balance
Transposition error

21. Finding Errors Does it balance? Prepare Trial Balance No
Did you find the mistake?
Apply Shortcut Tests No
Did you find the mistake?
Perform Balancing Steps

22. Shortcut Tests Test # 1 Test # 2
Once the difference is calculated, search the Trial Balance, Ledger and Journal for that amount.
Test # 2
If the Trial Balance difference is an even amount, divide by 2 and search Ledger & Journal.

23. Shortcut Tests Cont. Test # 3 Test # 4
If the difference is a multiple of 10, there may be an addition or subtraction error. Calculate Trial Balance & Ledger Accounts again.
Test # 4
If the difference is divisible by 9, the error may be due to a transposition of numbers. Examine Trial Balance, Ledger and Journal.

24. Balancing Steps # 1: Re-add the Trial Balance
# 2: Check transfer of account balances from the Ledger to the Trial Balance.
# 3: Re-add account balances in the Ledger – double check Dr/Cr (indicators)

25. Balancing Steps Cont. # 4: Check Posting from Journal to Ledger
Incorrect Amounts
Amounts not posted
Amounts posted twice
Amounts posted in wrong column
# 5: Check to see each entry in the Journal balances correctly and is analyzed correctly (Dr/Cr)

26. Source Documents Necessary proof of transactions
Cheques written: payment by us, dr A/P or ??? cr Cash
Cheques received: dr Cash or A/R, cr Sales

27. Source Documents: Cash Sales Slips
Record of all cash received
dr Cash
cr Sales or A/R
Often called Cash Receipts

28. Source Documents: Sales Invoice
Sale on credit (account)
dr A/R
cr Sales

29. Source Documents: Purchase Invoice
Purchase item on credit (account) dr
cr A/P

30. Source Documents: Other
Memos: e.g., owner withdraws supplies for persona use; dr. Drawings, cr Supplies
Bank Credit Memo: bank gives you cash, e.g., interest; dr Cash cr Interest Revenue
Bank Debit Memo: bank withdraws cash from your account, e.g., service charge;
dr Bank Charges cr Cash