Transcript Journalizing Transactions

Journalizing Transactions
General Notes
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If a co. receives cash – it is ALWAYS a
debit.
If a co. pays cash out – it is ALWAYS a
credit.
An expense is ALWAYS debited.
Sales is ALWAYS credited.
Drawing is ALWAYS debited.
4.1
Journals, Source Documents, and
Recording Entries in a Journal
Journals and Journalizing
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A form for recording transactions in
chronological order is called a journal.
Recording transactions in a journal is
called journalizing.
Each business uses the kind of journal
that best fits the needs of that
business.
A Five-Column Journal
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Encore Music uses a journal that has five
amount columns: General Debit, General
Credit, Sales Credit, Cash Debit, and Cash
Credit.
A journal amount column headed with an
account title is called a special amount
column.
A journal amount column that is not headed
with an account title is called a general
amount column.
A Five-Column Journal
Con’t
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Transactions are recorded in a journal
in order by date.
A Five-Column Journal
Con’t
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Double-Entry Accounting
– Information for each transaction recorded
in a journal is called an entry.
– The recording of debit and credit parts of
a transaction is called double-entry
accounting.
– Double-Entry Accounting assures that
debits equals credits.
A Five-Column Journal
Con’t
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Source Documents
– A business paper from which information
is obtained for a journal entry is called a
source document.
– Objective Evidence is applied when a
sourced document is prepared for each
transaction.
– The amounts must be accurate and true.
Checks
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A business form ordering a bank to
pay cash from a bank account is called
a check.
The source document for cash
payments is a check.
The checks are prenumbered.
Sales Invoices
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A form describing the goods or services
sold, the quantity, and the price is called an
invoice. - Used when something is sold on
account.
An invoice used as a source document for
recording a sale on account is called a sales
invoice.
A sales invoice is prepared in duplicate.
– The original copy is given to the customer.
– The copy is used as the source document for the
sale on account transaction.
Receipts
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A business form giving written
acknowledgement for cash received is
called a receipt.
The receipts are prenumbered to help
account for all of the receipts.
Memorandums
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A form on which a brief message is
written describing a transactions is
called a memorandum.
They are prenumbered.
A brief note is written on the
memorandum to describe the
transaction.
Calculator Tapes
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At the end of each day, Encore Music
uses a printing electronic calculator to
total the amount of cash received from
sales for that day.
Each calculator tapes is dated and
numbered.
Journalizing
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An entry consists of four parts:
– Date
– Debit
– Credit
– Source Document
4.4
Proving and Ruling a
Journal
Proving a Journal Page
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After a co. uses all but the last line on a
journal page, columns are proved and ruled
before totals are carried forward to the next
page.
First verify that total debits on the page
equal the total credits.
– Add each of the amount columns.
– Add the debit column totals and the credit
column totals.
– Verify that the total debits and total credits are
equal.
Proving a Journal Page
Con’t
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1. Rule a single line across all amount
columns directly below the last entry.
On the next line write the date in the date
column.
Write Carried Forward in the Account Title
and a checkmark in the Post. Ref.
Write each column total below the single
line.
Rule double lines.
Starting a New Journal
Page
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1. Write the page number, 2, at the top of
the journal.
2. Write the Date, Brought Forward in the
Account Title, and check mark in the Post
Ref.
3. Record the column totals brought
forward from the previous page.
Always prove and rule a journal at the end
of each month even if the last page for the
month is not full.
Starting a New Journal
Page
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Determining that the amount of cash agrees
with the accounting records is called proving
cash.
Cash on hand at the beginning of the month
+ Total cash received during the month
Equals Total
-Total cash paid during the month
Equals cash balance at the end of the month