Chapter 4 The Journal and the Ledger. General Journal Fills the need to record all parts of a transaction in one place Includes date, debit, credit and.

Chapter 4

The Journal and the Ledger

General Journal

• Fills the need to record all parts of a transaction in one place

• Includes date, debit, credit and brief explanation• Advantages:

– Fewer errors– Easy to check all debit and credit entries made– Chronological order– Gives idea of volume of business– Convenient picture of day’s business

• Click here for online journal demo• In-class demo

General Ledger

• Provides a balance for each account• Records the debit and credit entries from

the journal for every transaction• Useful for creating financial statements• Posting is the process of transferring

transaction info from journal to ledger• Click here for online ledger demo

(click on Chapter 7 posting)• In-class demo

Chart of Accounts• List of ledger accounts by name and

number• Numbers save time and increase accuracy• Sample numbering system:

100-199 Assets200-299 Liabilities300-399 Owner Equity 400-499 Revenue500-599 Expenses

Ledger Hints & Tips

• Particulars column rarely used

• Exception: “opening entry”

• Exception: when copying balance from end of a page … “forward”

• Dr/Cr column states balance of the account and not nature of entry

• Place a √ in P.R. column when forwarding

Trial Balance Errors

• Find the difference between debits and credit totals

• If 1, 10, 100, etc. may be adding error on trial balance or accounts

• Check for difference in an account balance• Divide difference by 2, meaning an account

balance on wrong side on trial balance• If difference is divisible by 9 with no remainder,

transposition error made, e.g. 72 not 27• Missing entry from journal to ledger• Re-check!

Correcting Journal Entries

• Proper method:– “reverse” offending entry, that is, exchange

the debit and credit entries in a transaction– Journalize correct entry

Accounting Cycle

• Transactions occur >

• Journalize in journal >

• Post to Ledger >

• Prepare Trial Balance >

• Prepare Financial Statements >

• New accounting period begins

Source Documents

• Necessary proof of transactions• Cheques written: payment by us, dr A/P or ??? cr Cash• Cheques received: dr Cash or A/R, cr Sales

Source Documents: Cash Sales Slips

• Record of all cash received

• dr Cash

• cr Sales or A/R

• Often called Cash Receipts

Source Documents: Sales Invoice

• Sale on credit (account)

• dr A/R

• cr Sales

Source Documents: Purchase Invoice

• Purchase item on credit (account)

• cr ???

• cr A/P

Source Documents: Other

• Memos: e.g., owner withdraws supplies for persona use; dr. Drawings, cr Supplies

• Bank Credit Memo: bank gives you cash, e.g., interest; dr Cash cr Interest Revenue

• Bank Debit Memo: bank withdraws cash from your account, e.g., service charge;

dr Bank Charges cr Cash