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Chapter

4
The General Journal and
the General Ledger

Section 1: The General Journal

Section Objectives

1. Record transactions in the

general journal.

2. Prepare compound journal

entries.

McGraw-Hill © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

QUESTION:

What is the accounting cycle?

ANSWER:

The accounting cycle is a series of steps

performed during each accounting
period to classify, record, and
summarize data for a business and to
produce needed financial information.

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 The Accounting Cycle

This section discusses the first two

steps of the accounting cycle.

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 The Accounting Cycle
Step 2 Step 3
Journalize the Post the
Step 1 data about data about Step 4
Analyze transactions transactions Prepare
transactions a
worksheet

Step 5
Prepare
financial
statements

Step 9 Step 6
Interpret Record
the financial Step 7 adjusting
information Step 8 Record entries
Prepare a closing
postclosing entries
trial balance

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Journals

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QUESTION:

What is a journal?

ANSWER:

A journal is a record of original entry.

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 Journal

 A journal is a diary of business activities.

 There are different types of journals.

 Transactions are entered in the journal in

chronological order.

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QUESTION:

What is chronological order?

ANSWER:

Chronological order is the order in

which events occur.

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The General Journal

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 Objective 1

Record transactions in the

general journal.

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QUESTION:

What is a general journal?

ANSWER:

A general journal is a financial record for

entering all types of business
transactions.

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QUESTION:

What is journalizing?

ANSWER:

Journalizing is the process of recording

transactions in a journal.

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 GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
2007
Nov. 6 Cash 90,000.00
Jason Taylor, Capital 90,000.00

Enter the account to be debited.

Enter the amount on the same line in the Debit column.
Enter the account to be credited.
Enter the amount on the same line in the Credit column.

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 GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
2007
Nov. 6 Cash 90,000.00
Jason Taylor, Capital 90,000.00
Investment by owner, Memo 01

Then enter a complete but concise description of the transaction.

Whenever possible, the journal entry should refer to the source of the
information.
Document numbers are part of the audit trail.

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QUESTION:

What is an audit trail?

ANSWER:

An audit trail is a chain of references

that makes it possible to trace
information, locate errors, and prevent
fraud.

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Recording November Transactions
in the General Journal

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 Recording a
Business Transaction

1. Analyze the financial event.

 Identify the accounts affected.
 Classify the accounts affected.
 Determine the amount of increase or decrease for each account
affected.
2. Apply the rules of debit and credit.
a. Which account is debited? For what amount?
b. Which account is credited? For what amount?

3. Make the entry in T-account form.

4. Record the complete entry in general journal form.

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 Business Transaction
On November 6 Jason Taylor withdrew $90,000 from
personal savings and deposited it in a new business
checking account for JT’s Consulting Services.

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 Cash Investment by Owner

Which account is debited? Which account is credited?

For what amount? For what amount?

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 Cash Investment by Owner

Cash Jason Taylor, Capital

(a) 90,000 (b) 90,000

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 Cash Investment by Owner
GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
2007
Nov. 6 Cash 90,000.00
Jason Taylor, Capital 90,000.00
(Investment by owner)

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 Business Transaction
On November 7 JT’s Consulting Services issued Check
1001 for $10,000 to purchase a computer and other
equipment.

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 Cash Purchase of Equipment

Which account is debited? Which account is credited?

For what amount? For what amount?

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 Cash Purchase of Equipment

Equipment Cash

(c) 10,000 (d) 10,000

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 Cash Purchase of Equipment
GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

Nov. 7 Equipment 10,000.00

Cash 10,000.00
(Purchased equip., Check 1001)

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 Business Transaction

On November 10 JT’s Consulting Services purchased

office equipment on account for $12,000.

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 Credit Purchase of Equipment

Which account is debited? Which account is credited?

For what amount? For what amount?

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Credit Purchase of Equipment

Equipment Accounts Payable

(e) 12,000 (f) 12,000

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 Credit Purchase of Equipment
GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

Nov. 10 Equipment 12,000.00

Accounts Payable 12,000.00
Purchased equipment on
account from Office Plus,
Inv. 2223, due in 60 days
All required information
should be included
in the explanation.

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 Business Transaction
On November 28, JT’s Consulting Services
purchased supplies for $3,000, Check 1002.

Which account is debited? Which account is credited?

For what amount? For what amount?

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 Cash Purchase of Supplies

Supplies Cash

(g) 3,000 (h) 3,000

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 Cash Purchase of Supplies
GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

Nov. 28 Supplies 3,000.00

Cash 3,000.00
(Purchased supplies, Ck. 1002)

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 Business Transaction

On November 30 JT’s Consulting Services paid Office

Plus $5,000 in partial payment of Invoice 2223, Check
1003.

Which account is debited? Which account is credited?

For what amount?

For what amount?

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 Payment to a Creditor

Accounts Payable Cash

(j) 5,000 (i) 5,000

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 Payment to a Creditor
GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

Nov. 30 Accounts Payable 5,000.00

Cash 5,000.00
Paid on account, Office Plus,
Invoice 2223, Check 1003

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 Business Transaction
On November 30, JT’s Consulting Services wrote
Check 1004 for $7,000 to prepay rent for December and
January.

Which account is debited? Which account is credited?

For what amount? For what amount?

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 Recording Prepaid Rent

Prepaid Rent Cash

(k) 7,000 (l) 7,000

*Note: Both accounts affected are assets…

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 Recording Prepaid Rent
GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

Nov. 30 Prepaid Rent 7,000.00

Cash 7,000.00
Paid Dec. and Jan. rent
in advance; Check 1004

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Recording December
Transactions
in the General Journal

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 1. Performed services for $26,000 in cash.

Which account is debited? Which account is credited?

For what amount? For what amount?

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1. Performed services for $26,000 in cash.

Cash Fees Income

26,000 26,000

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 1. Performed services for $26,000 in cash.

GENERAL JOURNAL PAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
2004

Dec. 31 Cash 26,000.00

Fees Income 26,000.00
Performed services for cash

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 2. Performed services for $9,000 on credit.

Which account is debited? Which account is credited?

For what amount?

For what amount?

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2. Performed services for $9,000 on credit.

Accounts Receivable Fees Income

9,000 9,000

Record the revenue

as earned even if
you haven’t
received the cash.

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 2. Performed services for $9,000 on credit.

GENERAL JOURNAL PAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
Dec. 31 Accounts Receivable 9,000.00
Fees Income 9,000.00
Performed services on credit

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 3. Received $4,000 in cash from credit clients on
their accounts.

Which account is debited? Which account is credited?

For what amount? For what amount?

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3. Received $4,000 in cash from credit clients on
their accounts.
Cash Accounts Receivable

4,000 4,000

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 3. Received $4,000 in cash from credit clients on
their accounts.

GENERAL JOURNAL PAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
Dec. 31 Cash 4,000.00
Accounts Receivable 4,000.00
Received cash from credit
clients on account

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 4. Paid $7,000 for salaries.

Which account is debited? Which account is credited?

For what amount? For what amount?

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4. Paid $7,000 for salaries.

Salaries Expense Cash

7,000 7,000

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 4. Paid $7,000 for salaries.

GENERAL JOURNAL PAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
Dec. 31 Salaries Expense 7,000.00
Cash 7,000.00
Paid monthly salaries to
employees, Check 1005-1006

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 5. Paid $500 for a utility bill.

Which account is debited? Which account is credited?

For what amount? For what amount?

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5. Paid $500 for a utility bill.

Utilities Expense Cash

500 500

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 5. Paid $500 for a utility bill.

GENERAL JOURNAL PAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
Dec. 31 Utilities Expense 500.00
Cash 500.00
Paid monthly bill for utilities,
Check 1007

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 6. The owner withdrew $4,000 for personal expenses.

Which account is debited? Which account is credited?

For what amount? For what amount?

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6. The owner withdrew $4,000 for personal expenses.

Jason Taylor, Drawing Cash

4,000 4,000

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 6. The owner withdrew $4,000 for personal expenses.

GENERAL JOURNAL PAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
Dec. 31 Jason Taylor, Drawing 4,000.00
Cash 4,000.00
Owner withdrew cash for
personal expenses,
Check 1008

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 Thank You
for using

College Accounting, 11th Edition

Price • Haddock • Brock

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