CHAPTER SEVEN

The General Journal

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THE GENERAL JOURNAL

Objectives:
1. Record transactions in a general journal. 2. Use a chart of accounts. 3. Correct errors in the journal.

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The Use of the General Journal

The accounting record known as a journal is used to list all the necessary information about a transaction in one place.
The journal is known as the book of original entry.
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The Use of the General Journal

(continued)

The process of recording these transactions in the journal is known as journalizing, or recording journal entries.
Double-entry accounting is the system of journalizing when each transaction affects at least two accounts.
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Journalizing a Businesss Transactions

Accounts used in the recording of transactions are taken from a chart of accounts.
The chart of accounts lists, by number in chronological order, the accounts determined to be used by the business.
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Journalizing a Businesss Transactions (continued)

Pencil footings are used at the bottom of the money columns to provide balance of debits and credits.
Entries may contain more than one debit and/or credit.
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Transaction
Record the owners investment in the business:
Cash, $32,000 Accounts Receivable, $2,000 Office Equipment, $12,000 Delivery Trucks, $60,000 Accounts Payable, $20,000 Capital, $86,000
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Transaction Analysis
The assets (debits) and liabilities (credit) and owners equity account (credit) are recorded in the journal.
Date
20 xx

Description 1 Cash Accounts Receivable Office Equipment Delivery Trucks Accounts Payable Christopher Johns, Capital
Investment in the business

Post Ref

Debit 32,000 2,000 12,000 60,000

Credit

Nov

20,000 86,000

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Transaction

Paid $1800 to Wilson Management for the November rent.

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Transaction Analysis
An increase in expenses decreases owners equity (debit Rent Expense).

An asset decreases (credit Cash).

Date
20 xx

Description 1 Rent Expense Cash

Paid November rent.

Post Ref

Debit 1,800

Credit

1,800

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Transaction

Paid $400 to Kenworth Truck Sales on account.

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Transaction Analysis
A liability decreases (debit Accounts Payable). An asset decreases (credit Cash).
Date
20 xx

Description 10 Accounts Payable Cash

Paid Kenw orth Truck Sales on account

Post Ref

Debit 400

Credit

400

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Transaction

Paid $150 for gasoline and oil for the trucks.

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Transaction Analysis
An increase in expenses decreases owners equity (debit Truck Expense).
An asset decreases (credit Cash).
Date
20 xx Post Ref

Description 13 Truck Expense Cash

Paid for gasoline and oil.

Debit 150

Credit

150

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2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

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Accounting Terminology
Chart of accounts
Chronological order Compound entry

Double-entry accounting
General journal Journal Journalizing Opening Entry
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Chapter Summary
A journal is used to keep a record of the day-to-day financial activities of a business. Some people use T accounts to analyze the transactions before entering them into the journal.
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Chapter Summary(continued)
The journal is used to list essential information about each transaction. The journal is called the book or record of original entry. A general journal is a common type of journal.
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Chapter Summary(continued)
A systematically arranged list of a businesss accounts is known as a chart of accounts. The chart of accounts shows account classifications (assets, liabilities, owners equity, revenue, and expenses) as well as the name and number of each account.
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Chapter Summary(continued)
A journal entry may contain more than one debit and/or credit. This type of entry is called a compound entry. The totals of the debit and credit columns must be equal no matter how many accounts are used in a transaction.
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Topic Quiz
Answer the following true/false questions:

1. T accounts may be used in place of journalizing. 2. The journal is known as the record or book of original entry. 3. Revenue and expense accounts are not on the chart of accounts.
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FALSE

TRUE

FALSE

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Investigating on the Internet

Sources of information about general journals can be accessed at the websites of most businesses. As a research assignment, access a business website and report those sources of information that might concern the use of journals in business.
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1. T accounts may be used in place of journalizing.

FALSE
T accounts may be used to analyze a transaction, but the journal must be used to record the financial activity and the accounts affected.
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(Return to Topic Quiz)

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3. Revenue and expense accounts are not on the chart of accounts.

FALSE
All accounts are listed on the chart of accounts.

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(Return to Topic Quiz)