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CHAPTER FOUR

CHAPTER FOUR. JOURNALIZING AND POSTING TRANSACTIONS. FLOW OF DATA. STEP #1. INPUT. Analyze transactions using. SOURCE DOCUMENTS and CHART OF ACCOUNTS. FLOW OF DATA. PROCESSING. Enter business transactions in the. Post the entries in the journal to the .

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CHAPTER FOUR

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  1. CHAPTER FOUR JOURNALIZING AND POSTING TRANSACTIONS

  2. FLOW OF DATA STEP #1 INPUT Analyze transactions using SOURCE DOCUMENTS and CHART OF ACCOUNTS

  3. FLOW OF DATA PROCESSING 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 DELIVERYCHART OF ACCOUNTS Assets (100-199) 101 Cash 122 Accts. Rec. 141 Supplies 145 Prepaid Ins. 185 Delivery Eq. Assets begin with 1

  6. JESSICA JANE’S CAMPUS DELIVERYCHART OF ACCOUNTS Assets (100-199) 101 Cash 122 Accts. Rec. 141 Supplies 145 Prepaid Ins. 185 Delivery Eq. Liabilities (200-299) 202 Accounts Pay. Liabilities begin with 2

  7. JESSICA JANE’S CAMPUS DELIVERYCHART OF ACCOUNTS Assets (100-199) 101 Cash 122 Accts. Rec. 141 Supplies 145 Prepaid Ins. 185 Delivery Eq. Liabilities (200-299) 202 Accounts Pay. Owner’s Eq. (300-399) 311 Jessica Jane, Capital 312 Jessica Jane, Drawing Owner’s Equity begins with 3

  8. JESSICA JANE’S CAMPUS DELIVERYCHART OF ACCOUNTS Assets (100-199) Revenues (400-499) 101 Cash 401 Delivery Fees 122 Accts. Rec. 141 Supplies 145 Prepaid Ins. 185 Delivery Eq. Liabilities (200-299) 202 Accounts Pay. Owner’s Eq. (300-399) 311 Jessica Jane, Capital 312 Jessica Jane, Drawing Revenues begin with 4

  9. JESSICA JANE’S CAMPUS DELIVERYCHART OF ACCOUNTS Assets (100-199) Revenues (400-499) 101 Cash 401 Delivery Fees 122 Accts. Rec. 141 Supplies Expenses (500-599) 145 Prepaid Ins. 511 Wages Exp. 185 Delivery Eq. 521 Rent Exp. 525 Tele. Exp. Liabilities (200-299) 202 Accounts Pay. Owner’s Eq. (300-399) 311 Jessica Jane, Capital 312 Jessica Jane, Drawing Expenses begin with 5

  10. JESSICA JANE’S CAMPUS DELIVERYCHART OF ACCOUNTS Assets (100-199) Revenues (400-499) 101 Cash 401 Delivery Fees 122 Accts. Rec. 141 Supplies Expenses (500-599) 145 Prepaid Ins. 511 Wages Exp. 185 Delivery Eq. 521 Rent Exp. 525 Tele. Exp. Liabilities (200-299) 202 Accounts Pay. Owner’s Eq. (300-399) 311 Jessica Jane, Capital 312 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. Check stubs or copies of checks Cash Payments SOURCE DOCUMENTS Example: Provides Information about: • Receipt stubs, copies of receipts, cash register tapes, or memos of cash register totals • Cash Receipts

  13. Copies of sales tickets or sales invoices issued to customers or clients SOURCE DOCUMENTS Example: Provides Information about: • 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. 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. 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 DEBIT PR 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 DATE DESCRIPTION DEBIT PR CREDIT 2000 1 CASH JUNE 1 25000 00 2 STEP #2 b ENTER THE AMOUNT OF THE DEBIT

  20. GENERAL JOURNAL DEBIT PR CREDIT DATE DESCRIPTION 2000 1 CASH JUNE 1 25000 00 2 M. ADAMS, CAPITAL 25000 00 STEP #3 ENTER THE ACCOUNT NAME & AMOUNT OF CREDIT

  21. GENERAL JOURNAL DATE DESCRIPTION DEBIT PR CREDIT 2000 1 CASH JUNE 1 25000 00 M. ADAMS, CAPITAL 2 25000 00 3 Owner’s original 4 investment in business STEP #4 ENTER THE EXPLANATION Indent even further

  22. GENERAL JOURNAL DEBIT PR CREDIT DATE DESCRIPTION 2000 1 CASH JUNE 1 25000 00 2 M. ADAMS, CAPITAL 25000 00 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 OFFICE EQUIP. 0FFICE SUPPLIES 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 OFFICE EQUIPMENT Dr. Cr. + $2,500 INCREASED

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

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

  30. 2 DEBITS & 1 CREDITBUT 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 DATE DESCRIPTION DEBIT PR CREDIT 2000 1 OFFICE EQUIPMENT JUNE 10 2500 00 OFFICE SUPPLIES 2 500 00 3 CASH 3000 00 4 Purchased copier and supplies 5 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 DEBIT PR CREDIT DATE DESCRIPTION 2000 1 CASH JUNE 1 25000 00 2 M. ADAMS, CAPITAL 25000 00 3 Owner’s original 4 investment in business 5 LET’S POST THIS ENTRY TO THE GENERAL LEDGER

  36. FOUR-COLUMN ACCOUNT 101 CASH Account No. Account: BALANCE DATE ITEM PR DR. CR. DR. CR. EACH ACCOUNT IS NUMBERED ACCOUNT NAME

  37. FOUR-COLUMN ACCOUNT 101 CASH 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 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 Account No. Account: BALANCE DATE ITEM PR DR. CR. DR. CR. 2000 June 1 25,000 STEP #2 ENTER AMOUNT

  40. FOUR-COLUMN ACCOUNT 101 CASH Account No. Account: BALANCE DATE ITEM PR DR. CR. DR. CR. 2000 June 1 25,000 25,000 STEP #3 ENTER NEW BALANCE

  41. 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 DEBIT PR CREDIT DATE DESCRIPTION 2000 1 CASH JUNE 1 101 25000 00 2 M. ADAMS, CAPITAL 25000 00 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. Now with Account Numbers Jessica Jane’s Campus DeliveryTrial BalanceJune 30, 20-- Account Title Acct No. Debit Balance Credit Balance Cash 101 370 00 Accounts Receivable 122 650 00 Supplies 141 80 00 Prepaid Insurance 145 200 00 Delivery Equipment 185 3600 00 Accounts Payable 202 1800 00 Jessica Jane, Capital 311 2000 00 Jessica Jane, Drawing 312 150 00 Delivery Fees 401 2150 00 Wages Expense 511 650 00 Rent Expense 521 200 00 Telephone Expense 525 50 00 5950 00 5950 00

  45. FINDING AND CORRECTING ERRORS IN THE TRIAL BALANCE

  46. Sloppy Steve’s Trial BalanceDecember 31, 20-- Help!! My Trial Balance Doesn’t Balance Account Title Acct No. Debit Balance Credit Balance Cash 101 850 00 Accounts Receivable 122 1650 00 Supplies 141 230 00 Prepaid Insurance 145 600 00 Office Equipment 185 6300 00 Accounts Payable 202 1800 00 Steve, Capital 311 3500 00 Steve, Drawing 312 500 00 Delivery Fees 401 5550 00 Wages Expense 511 450 00 Rent Expense 521 200 00 Telephone Expense 525 70 00 10700 00 10580 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. 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

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