THE RECORDING

PROCESS

1 analyze each transaction (+, -)

2 enter transaction in a journal
3 transfer journal information to
ledger accounts
 THE JOURNAL

• Transactions
– Are initially recorded in chronological
order before they are transferred to the
ledger accounts.
• A general journal has
1 spaces for dates
2 account titles and explanations
3 references
4 two amount columns
 THE JOURNAL
A journal makes several contributions to
recording process:
1 discloses in one place the complete effect of a
transaction
2 provides a chronological record of transactions
3 helps to prevent or locate errors as debit and
credit amounts for each entry can be compared
 JOURNALIZING

• Entering transaction data in the journal

is known as journalizing.
• Separate journal entries are made for
each transaction.
• A complete entry consists of:
1 the date of the transaction,
2 the accounts and amounts to be
debited and credited,
3 a brief explanation of transaction.
 TECHNIQUE OF
JOURNALIZING
The
The date
date of
of the
the transaction
transaction is
is entered
entered into
into the
the
date
date column.
column.

GENERAL JOURNAL J1
Date Account Titles and Explanation Ref. Debit Credit
2021
Sept. 1 Cash 75,000
R. Neal, Capital 75,000
(Invested cash in business)

1 Office Equipment 25,000

Cash 25,000
(Purchased office equipment
for cash)
 TECHNIQUE OF
JOURNALIZING
The
The debit
debit account
account title
title is
is entered
entered at at the
the extreme
extreme
left
left margin
margin ofof the
the Account
Account Titles
Titles and
and Explanation
Explanation
column.
column. The The credit
credit account
account title
title is
is indented
indented on
on the
the
next
next line.
line.
GENERAL JOURNAL J1
Date Account Titles and Explanation Ref. Debit Credit
2021
Sept. 1 Cash 75,000
R. Neal, Capital 75,000
(Invested cash in business)

1 Office Equipment 25,000

Cash 25,000
(Purchased equipment for
cash)
 TECHNIQUE OF
JOURNALIZING
The
The amounts
amounts for for the
the debits
debits are
are recorded
recorded in in the
the
Debit
Debit column
column andand the
the amounts
amounts forfor the
the credits
credits are
are
recorded
recorded in
in the
the Credit
Credit column.
column.
 TECHNIQUE OF
JOURNALIZING
AA brief
brief explanation
explanation of
of the
the transaction
transaction is
is given.
given.
 TECHNIQUE OF
JOURNALIZING
AA space
space is
is left
left between
between journal
journal entries.
entries. The
The
blank
blank space
space separates
separates individual
individual journal
journal entries
entries
and
and makes
makes the the entire
entire journal
journal easier
easier to
to read.
read.

GENERAL JOURNAL J1
Date Account Titles and Explanation Ref. Debit Credit
2021
Sept. 1 Cash 75,000
R. Neal, Capital 75,000
(Invested cash in business)

1 Office Equipment 25,000

Cash 25,000
(Purchased equipment for
cash)
 TECHNIQUE OF
JOURNALIZING
The
Thecolumn
columnentitled
entitledRef.
Ref. is
isleft
leftblank
blankatatthe
thetime
time
journal
journal entry
entryisismade
madeand
andis isused
usedlater
laterwhen
whenthethe
journal
journal entries
entriesare
aretransferred
transferredto tothe
theledger
ledger
accounts..
accounts
 SIMPLE AND COMPOUND
JOURNAL ENTRIES

IfIf an
an entry
entry involves
involves only only two
two accounts,
accounts, one
one debit
debit
and
and oneone credit,
credit, itit is
is considered
considered aa simple
simple entry.
entry.
 COMPOUND JOURNAL
ENTRY
When
When three
three or
or more
more accounts
accounts are are required
required inin
one
one journal
journal entry,
entry, the
the entry
entry is
is referred
referred to
to as
as aa
compound
compound entry.
entry.

3
 COMPOUND JOURNAL
ENTRY
This
Thisis
isthe
thewrong
wrongformat;
format;all
all debits
debitsmust
mustbe
belisted
listed
before
beforethe
thecredits
creditsare
arelisted.
listed.
 THE LEDGER
A Group of accounts maintained by a
company is called the ledger.
A ledger contains all the assets,
liabilities, and owner’s equity
accounts
POSTING A JOURNAL ENTRY

In the ledger, enter in the appropriate columns of the account(s)

debited the date, journal page, and debit amount shown in the journal.
POSTING A JOURNAL ENTRY

In the reference column of the journal, write the account

number to which the debit amount was posted.
 CHART OF ACCOUNTS

AAChart
Chartof
ofAccounts
Accounts lists
liststhe
theaccounts
accountsand andthe
the
account
accountnumbers
numberswhich
whichidentify
identifytheir
theirlocation
locationin
inthe
the
ledger.
ledger.
 INVESTMENT OF CASH BY
OWNER
October 1, C. R. Byrd purchases $5,000 of
Transaction equipment by issuing a 3-month, 12% note
payable.

Basic •The asset Office Equipment is increased $5,000.

Analysis •The liability, Notes Payable is increased $5,000.

Debits increase assets: debit Office Equipment

Debit-Credit
$5,000.
Analysis Credits increase liabilities: credit Notes Payable
$5,000.
 PURCHASE OF OFFICE
EQUIPMENT
JOURNAL
JOURNALENTRY
ENTRY

POSTING
POSTING
 PAYMENT OF MONTHLY
RENT

October 3, office rent for October is paid in cash,

Transaction $900.

Basic The expense Rent is increased $900

Analysis Payment pertains only to the current month
Asset Cash is decreased $900.

Debit-Credit Debits increase expenses: debit Rent Expense $900.

Analysis Credits decrease assets: credit Cash $900.
 PAYMENT OF RENT
EXPENSE
JOURNAL
JOURNALENTRY
ENTRY

POSTING
POSTING
 THE TRIAL BALANCE

• The trial balance is a list of accounts and

their balances at a given time.

• The primary purpose of a trial balance is

to prove debits = credits after posting.

• If debits and credits do not agree, the

trial balance can be used to uncover
errors in journalizing and posting.
A TRIAL BALANCE

The total
debits must
equal the total
credits.