1. Section 2 Recording Transactions in the General Journal
Chapter 6
Section 2 Recording 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.

2. Why It’s Important Key Terms Chapter 6 general journal
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
Why It’s Important
The general journal is a permanent record of the financial transactions of a business.
Key Terms
general journal

3. Recording a General Journal Entry
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
Recording a General Journal Entry
The general journal is an all purpose journal where all the transactions of a business may be recorded.
- Record page number in journal in upper right corner
1 Date of the
transaction
2 Name of the account
debited
3 Amount of the debit
Information is recorded in chronological order (the order that the transactions occur)
A journal is the only place where complete details of a transaction are recorded
In the upper right-hand corner there is a line for the page number, pages are numbered consecutively
The general journal has two amount columns
The first amount column, on the left, is used to record debit amounts…remember debit means left
The second amount column, on the right, is used to record credit amounts…remember credit means right
It may be necessary to abbreviate in order to fit it on one line of the journal…i.e. Accts. Pay.-North Shore Auto, Accts. Rec.-Green Co.
Every transaction requires a debit and a credit entry
DEBITS ARE RECORDED BEFORE CREDITS
Source document references are entered on a separate line
Do not use dollar signs, a sloppy dollar sign could be mistaken for a number, causing an error in your records
Do not use commas or decimal points…the vertical lines in the amount columns take the place of commas and decimals
Under the accrual basis of accounting, income is reported as being earned at the time the job is COMPLETED or the service PROVIDED, which is not necessarily the same time as the money is received
Expenses are paid with a check to control cash and leave an audit trail
In the business world financial records are kept either in ink or in a computerized system where entries cannot be erased
4 Name of the
account credited
6 Source document
reference or an
explanation
5 Amount of the
credit

4. Recording a General Journal Entry (cont'd.)
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
Recording a General Journal Entry (cont'd.)
Business Transaction
BUSINESS TRANSACTION ANALYSIS
ANALYSIS Identify 1. Identify the accounts affected.
Classify 2. Classify the accounts affected.
+ / – 3. Determine the amount of the increase or decrease for each account affected.

5. Business Transaction (cont'd.)
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
Recording a General Journal Entry (cont'd.)
Business Transaction (cont'd.)
BUSINESS TRANSACTION ANALYSIS (cont'd.)
DEBIT-CREDIT RULE 4. Which account is debited? For what amount?
5. Which account is credited? For what amount?

6. Business Transaction (cont'd.)
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
Recording a General Journal Entry (cont'd.)
Business Transaction (cont'd.)
BUSINESS TRANSACTION ANALYSIS (cont'd.)
T ACCOUNTS 6. What is the complete entry in T-account form?
It is ALWAYS helpful to use T-accounts to analyze transactions…after analyzing many transactions, you will find that you need these tools less and less to determine the debit and credit parts of a journal entry…You will be required to create T-accounts along with General Journal entries on the final. I suggest you use them as you do your chapter work.

7. Business Transaction (cont'd.)
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
Recording a General Journal Entry (cont'd.)
Business Transaction (cont'd.)
BUSINESS TRANSACTION ANALYSIS (cont'd.)
JOURNAL ENTRY 7. What is the complete entry in general journal form?

8. On October 1, Maria Sanchez
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
Business Transaction 1
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.
ANALYSIS Identify 1. The accounts Cash in Bank and Maria Sanchez, Capital are affected.
Classify 2. 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.

9. Business Transaction 1 (cont'd.)
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
Recording a General Journal Entry (cont'd.)
Business Transaction 1 (cont'd.)
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.
DEBIT-CREDIT RULE 4. Increases in asset accounts are recorded as debits. Debit Cash in Bank for $25,000.
5. Increases in owner’s capital account are recorded as credits. Credit Maria Sanchez, Capital for $25,000.

10. Business Transaction 1 (cont'd.)
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
Recording a General Journal Entry (cont'd.)
Business Transaction 1 (cont'd.)
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 Bank Capital
T ACCOUNTS 6.
Debit +
25,000
Credit –
Debit –
Credit +
25,000

11. Business Transaction 1 (cont'd.)
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
Recording a General Journal Entry (cont'd.)
Business Transaction 1 (cont'd.)
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.
JOURNAL ENTRY 7.

12. Chapter 6 On October 9, Roadrunner Business Transaction 4
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
Business Transaction 4
On October 9, Roadrunner
bought a used truck on
account from North Shore
Auto for $12,000, Invoice 200.
ANALYSIS Identify 1. The accounts Delivery Equipment and Accounts Payable—North Shore Auto are affected.
Classify 2. 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.

13. Business Transaction 4 (cont'd.)
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
Recording a General Journal Entry (cont'd.)
Business Transaction 4 (cont'd.)
On October 9, Roadrunner bought a used truck on
account from North Shore Auto for $12,000, Invoice 200.
DEBIT-CREDIT RULE 4. Increases in asset accounts are recorded as debits. Debit Delivery Equipment for $12,000.
5. Increases in liability accounts are recorded as credits. Credit Accounts Payable—North Shore Auto for $12,000.

14. Business Transaction 4 (cont'd.)
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
Recording a General Journal Entry (cont'd.)
Business Transaction 4 (cont'd.)
On October 9, Roadrunner bought a used truck on
account from North Shore Auto for $12,000, Invoice 200.
T ACCOUNTS 6.
Delivery Accounts Payable—
Equipment North Shore Auto
Debit +
12,000
Credit –
Debit –
Credit +
12,000

15. Business Transaction 4 (cont'd.)
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
Recording a General Journal Entry (cont'd.)
Business Transaction 4 (cont'd.)
On October 9, Roadrunner bought a used truck on
account from North Shore Auto for $12,000, Invoice 200.
JOURNAL ENTRY 7.

16. Correcting Errors in General Journal Entries
Section 2 Recording Transactions in the General Journal (cont'd.)
Chapter 6
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.
Errors occur, when discovered it must be corrected
AN ERROR SHOULD NEVER BE ERASED…
Looks suspicious, may be seen as an attempt to cover up a mistake or illegally change accounting records

17. Preview Problem 6-5
See page 146