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Section 2Recording Transactions in the General Journal What You’ll Learn  The purpose of a general journal.  The parts and labeling of a general journal.

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Presentation on theme: "Section 2Recording Transactions in the General Journal What You’ll Learn  The purpose of a general journal.  The parts and labeling of a general journal."— Presentation transcript:

1 Section 2Recording 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. 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 The general journal is a permanent record of the financial transactions of a business. Why It’s Important The general journal is a permanent record of the financial transactions of a business. Section 2Recording Transactions in the General Journal (con’t.) Key Terms  general journal Key Terms  general journal

3 Recording a General Journal Entry The general journal is an all purpose journal in which all the transactions of a business may be recorded. Recording a General Journal Entry The general journal is an all purpose journal in which all the transactions of a business may be recorded. Section 2Recording Transactions in the General Journal (con’t.) 1 Date of the 2 Name of the account transaction debited 3 Amount of the debit 1 Date of the 2 Name of the account transaction debited 3 Amount of the debit 4 Name of the 6 Source document 5 Amount of the credit account credited reference or an explanation 4 Name of the 6 Source document 5 Amount of the credit account credited reference or an explanation

4 Business Transaction ANALYSIS Identify1.Identify the accounts affected. Classify2.Classify the accounts affected. + / –3.Determine the amount of the increase or decrease for each account affected. BUSINESS TRANSACTION ANALYSIS Recording a General Journal Entry (con’t.) Section 2Recording Transactions in the General Journal (con’t.)

5 Business Transaction (con’t.) DEBIT-CREDIT RULE 4.Which account is debited? For what amount? 5.Which account is credited? For what amount? Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.) BUSINESS TRANSACTION ANALYSIS (con’t.)

6 Business Transaction (con’t.) T ACCOUNTS 6.What is the complete entry in T- account form? Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.) BUSINESS TRANSACTION ANALYSIS (con’t.)

7 Business Transaction (con’t.) JOURNAL ENTRY 7.What is the complete entry in general journal form? Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.) BUSINESS TRANSACTION ANALYSIS (con’t.)

8 Business Transaction 1 ANALYSIS Identify1.The accounts Cash in Bank and Maria Sanchez, Capital are affected. Classify2.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. 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. Section 2Recording Transactions in the General Journal (con’t.)

9 Business Transaction 1 (con’t.) 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. 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. Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.)

10 Business Transaction 1 (con’t.) T ACCOUNTS 6. 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 BankCapital Debit + 25,000 Credit + 25,000 Credit – Debit – Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.)

11 Business Transaction 1 (con’t.) JOURNAL ENTRY 7. 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. Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.)

12 Business Transaction 4 ANALYSIS Identify1.The accounts Delivery Equipment and Accounts Payable—North Shore Auto are affected. Classify2.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. On October 9 Roadrunner bought a used truck on account from North Shore Auto for $12,000, Invoice 200. Section 2Recording Transactions in the General Journal (con’t.)

13 Business Transaction 4 (con’t.) 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. On October 9 Roadrunner bought a used truck on account from North Shore Auto for $12,000, Invoice 200. Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.)

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

15 Business Transaction 1 (con’t.) JOURNAL ENTRY 7. On October 9 Roadrunner bought a used truck on account from North Shore Auto for $12,000, Invoice 200. Section 2Recording Transactions in the General Journal (con’t.) Recording a General Journal Entry (con’t.)

16 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.  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. Section 2Recording Transactions in the General Journal (con’t.)

17 Check Your Understanding 1.What accounts would you use to record the purchase of a newspaper ad for cash? 2.What accounts would you use to record the sale of business services on account? 1.What accounts would you use to record the purchase of a newspaper ad for cash? 2.What accounts would you use to record the sale of business services on account? Section 2Recording Transactions in the General Journal (con’t.)

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