1. JOURNALIZING AND POSTING TRANSACTIONS
CHAPTER FOUR
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

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. SOURCE DOCUMENTS
Example: Provides Information about:
Copies of sales tickets or sales invoices issued to customers or clients
Sales of goods or services
Purchase invoices received from suppliers
Purchases of goods or services

14. JOURNAL Day by day listing of 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”

15. MARY ADAMS INVESTED $25,000 IN THE BUSINESS ON JUNE 1, 2000
EXAMPLE:
MARY ADAMS INVESTED $25,000 IN THE BUSINESS ON JUNE 1, 2000
NEW!
DATED
TRANSACTIONS

16. DEBITS = CREDITS + + CASH M. ADAMS, CAPITAL DR. CR. DR. CR.
NOW WE WILL
“JOURNALIZE”
THIS TRANSACTION
$25,000
$25,000

17. Year and month only written on
GENERAL JOURNAL
DEBIT PR
CREDIT
DATE
DESCRIPTION
2000 1
JUNE 1
STEP #1
ENTER DATE
Year and month only written on
first line of each page 2

18. GENERAL JOURNAL STEP #2 a ENTER THE NAME OF ACCOUNT BEING DEBITEDPR
CREDIT
DATE
DESCRIPTION
2000
STEP #2 a
ENTER THE NAME
OF ACCOUNT BEING
DEBITED
Align with left margin 1
CASH
JUNE 1 2

19. GENERAL JOURNAL STEP #2 b ENTER THE AMOUNT OF THE DEBIT CASH DATE
DESCRIPTION
DEBIT PR
CREDIT
2000 1
CASH
JUNE 1 2
STEP #2 b
ENTER THE AMOUNT
OF THE DEBIT

20. GENERAL JOURNAL STEP #3 ENTER THE ACCOUNT NAME & AMOUNT OF CREDIT CASH
DEBIT PR
CREDIT
DATE
DESCRIPTION
2000 1
CASH
JUNE 1 2
M. ADAMS, CAPITAL
STEP #3
ENTER THE ACCOUNT
NAME & AMOUNT
OF CREDIT

21. GENERAL JOURNAL STEP #4 ENTER THE EXPLANATION Indent even further CASH
DATE
DESCRIPTION
DEBIT PR
CREDIT
2000 1
CASH
JUNE 1 2
M. ADAMS, CAPITAL 3
Owner’s original 4
investment in business
STEP #4
ENTER THE EXPLANATION
Indent even further

22. GENERAL JOURNAL STEP #5 SKIP A LINE Leave a blank line
DEBIT PR
CREDIT
DATE
DESCRIPTION
2000 1
CASH
JUNE 1 2
M. ADAMS, CAPITAL 3
Owner’s original 4
investment in business 5
STEP #5
SKIP A LINE
Leave a blank line
between transactions

23. COMPOUND ENTRY
An entry requiring more than one debit and/or more than one credit
All debits come before any credits

24. COMPOUND ENTRY EXAMPLE:
PURCHASED $2,500 PIECE OF OFFICE EQUIPMENT AND $500 OF OFFICE SUPPLIES FOR CASH ON JUNE 10, 2000

25. “T” ACCOUNT ANALYSIS + + ASSET + OFFICE EQUIP. 0FFICE SUPPLIES ALL
DR.
CR.
DR.
CR. + +
ALL
ASSET
ACCOUNTS
CASH
DR.
CR. +

26. PURCHASED $2,500 PIECE OF OFFICE EQUIPMENT AND $500 OF OFFICE SUPPLIES FOR CASH ON JUNE 10, 2000
EACH
ACCOUNT?
INCREASE OR
DECREASE?

27. PURCHASED $2,500 PIECE OF OFFICE EQUIPMENT AND $500 OF OFFICE SUPPLIES FOR CASH ON JUNE 10, 2000
Dr.
Cr. +
$2,500
INCREASED

28. PURCHASED $2,500 PIECE OF OFFICE EQUIPMENT AND $500 OF OFFICE SUPPLIES FOR CASH ON JUNE 10, 2000
Dr.
Cr. +
$500
INCREASED

29. PURCHASED $2,500 PIECE OF OFFICE EQUIPMENT AND $500 OF OFFICE SUPPLIES FOR CASH ON JUNE 10, 2000
Dr.
Cr. +
$3,000
DECREASED

30. 2 DEBITS & 1 CREDIT BUT DEBIT $ = CREDIT $
OFFICE EQUIP.
0FFICE SUPPLIES
DR.
CR.
DR.
CR. + +
$500
$2,500
CASH
DR.
CR. +
$3,000

31. NOW LET’S JOURNALIZE THE TRANSACTION

32. GENERAL JOURNAL The order of the debits does not
DATE
DESCRIPTION
DEBIT PR
CREDIT
2000 1
OFFICE EQUIPMENT
JUNE 10 2
OFFICE SUPPLIES 3
CASH 4
Purchased copier and 5
supplies
The order of the debits does not
matter. But ALL debits must
come before any credits.

33. GENERAL LEDGER Set of all accounts used by a business
Similar to “T” accounts
Used to keep record of current balances
Commonly in form of FOUR-COLUMN 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. GENERAL JOURNAL LET’S POST THIS ENTRY TO THE GENERAL LEDGER CASH
DEBIT PR
CREDIT
DATE
DESCRIPTION
2000 1
CASH
JUNE 1 2
M. ADAMS, 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.
2000
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.
2000
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.
2000
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.
2000
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.
2000
June 1 J1
25,000
25,000
STEP #4
ENTER JOURNAL
PAGE NUMBER
“J” for journal and 1 for page 1

42. GENERAL JOURNAL STEP #5 ENTER THE LEDGER ACCOUNT NUMBER CASH
DEBIT PR
CREDIT
DATE
DESCRIPTION
2000 1
CASH
JUNE 1
101 2
M. ADAMS, CAPITAL 3
Owner’s original 4
investment in business 5
STEP #5
ENTER THE LEDGER
ACCOUNT NUMBER

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--
Help!! My Trial Balance Doesn’t Balance
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
Steve, Drawing
312
Delivery Fees
401
Wages Expense
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

55. CORRECTING ERRORS Two Methods: Ruling Method Correcting Entry Method
Erasing is NOT acceptable
It may suggest that you are trying to hide something

56. RULING METHOD Used for two types of errors:
When an incorrect journal entry has been made, but not yet posted
When a proper entry has been made but posted to the wrong account or for the wrong amount

57. Should be Wages Expense!!!!
GENERAL JOURNAL
DEBIT PR
CREDIT
DATE
DESCRIPTION
2000
Wages Expense 1
Entertainment Expense
SEPT 17 2
Cash
Should be Wages Expense!!!! 3
Paid employees 4 5 18
Prepaid Insurance 6
Cash 7
Paid premium for 8 8
month insurance 9
policy

58. CORRECTING ENTRY METHOD
Used when an incorrect entry has been:
journalized and
posted to the wrong account
Whole new entry must be made to correct accounts

59. EXAMPLE:
Assume that a $400 payment for rent was incorrectly debited to Repair Expense but correctly credited to Cash

60. I need to get $400 out of Repair Expense and into Rent Expense

61. GENERAL JOURNAL To put the $400 spent on rent into the proper account
DEBIT PR
CREDIT
DATE
DESCRIPTION
2000 1
Rent Expense
Sept. 25 2 3 4
To put the $400 spent
on rent into the proper
account 5 6 7 8 9

62. GENERAL JOURNAL To remove the $400 put in Repair Expense by error
DEBIT PR
CREDIT
DATE
DESCRIPTION
2000 1
Rent Expense
Sept. 25 2
Repair Expense 3 4 5
To remove the $400
put in Repair Expense
by error 6 7 8 9

63. GENERAL JOURNAL
DEBIT PR
CREDIT
DATE
DESCRIPTION
2000 1
Rent Expense
Sept. 25 2
Repair Expense 3
To correct error in which 4
payment for rent was 5
debited to Repair Expense 6 7
To explain that this entry was made to correct error in a prior transaction 8 9

64. Indicates this came from a Correcting Entry in the
FOUR-COLUMN ACCOUNT
521
Rent Expense
Account No.
Account:
BALANCE
DATE
ITEM PR
DR.
CR.
DR.
CR.
2000
Sept. 25
Correcting J6
400
400
Indicates this came from
a Correcting Entry in the
General Journal

65. $400 error has been removed
FOUR-COLUMN ACCOUNT
537
Repair Expense
Account No.
Account:
BALANCE
DATE
ITEM PR
DR.
CR.
DR.
CR.
2000
Sept. 10 J5 50 50
400
450 15 J5
Correcting 50 25 J6
400
Balance is now correct
$400 error has been removed