Recording Transactions In A General Journal

RECEIVED CASH FROM OWNER AS AN INVESTMENT1DATE20--12DateDebitGENERAL JOURNALACCOUNT TITLE1 CashBarbara Treviño, CapitalAug.2DOC. POST.NO.REF.R1August 1. Received cash from owner as aninvestment, 10,000.00. Receipt No. 1.PAGEDEBIT1CREDIT10 0 0 0 00110 0 0 0 003Information for each transaction recorded ina journal is known as an entry. An entry consistsof four parts: (1) date, (2) debit, (3) credit, and(4) source document. Before a transaction isrecorded in a journal, the transaction is analyzedinto its debit and credit parts.SourceDocument42CreditThe source document for this transaction isReceipt No. 1. (CONCEPT: Objective Evidence)The analysis of this transaction is shown in theT accounts.The asset account, Cash, is increased by adebit, 10,000.00. The owner’s capital account,Barbara Treviño, Capital, is increased by a credit, 10,000.00.CashF10,000.00Barbara Treviño, Capital10,000.00STEPSYIDollars and cents signs and decimal pointsare not used when writing amounts onruled accounting paper. Sometimes a colortint or a heavy vertical rule is used onprinted accounting paper to separate thedollars and cents columns.Journalizing cash received from owner as an investment1. Date. Write the date, 20--, Aug. 1, in the Date column. This entry is the first one on this journal page.Therefore, the year and month are both written for this entry. Neither the year nor the month are writtenagain on the same page.2. Debit. Write the title of the account debited, Cash, in the Account Title column. Write the debit amount, 10,000.00, in the Debit column.3. Credit. On the next line, indented about 1 centimeter, write the title of the account credited, BarbaraTreviño, Capital, in the Account Title column. This account title is indented to indicate that this account iscredited. Write the credit amount, 10,000.00, in the Credit column.4. Source document. On the first line of the entry, write the source document number, R1, in the Doc. No.column. The source document number, R1, indicates that this is Receipt No. 1. (The source document number is a cross reference from the journal to the source document. If more details are needed about thistransaction, a person can refer to Receipt No. 1.)Debits must equal credits for each entry in a general journal. After the entry is journalized, the equality ofdebits and credits is verified. For this entry, the total debits, 10,000.00, equal the total credits, 10,000.00.CHAPTER 4 Recording Transactions in a General Journal69

PAID CASH FOR SUPPLIES12DateDATEDebitGENERAL JOURNALACCOUNT TITLE3 C. POST.NO.REF.DEBITC11CREDIT1 5 7 7 0031 5 7 7 003August 3. Paid cash for supplies, 1,577.00.Check No. 1.44CreditThe source document for this transaction isCheck No. 1. (CONCEPT: Objective Evidence) Theanalysis of this transaction is shown in theT accounts.The asset account, Supplies, is increased by adebit, 1,577.00. The asset account, Cash, isdecreased by a credit, 1,577.00.Cash1,577.00FYIf you draw T accounts for analyzing transactions, it will make journalizing easier.ISTEPSJournalizing cash paid for supplies1. Date. Write the date, 3, in the Date column. This is not the first entry on thejournal page. Therefore, the year and month are not written for this entry.2. Debit. Write the title of the account debited, Supplies, in the Account Titlecolumn. Write the debit amount, 1,577.00, in the Debit column.3. Credit. On the next line, indented about 1 centimeter, write the titleof the account credited, Cash, in the Account Title column. Writethe credit amount, 1,577.00, in the Credit column.4. Source document. On the first line on this entry, write thesource document number, C1, in the Doc. No. column. The sourcedocument number, C1, indicates that this is Check No. 1.For this entry, the total debits, 1,577.00, equal the total credits, 1,577.00.R E M E M B E RIf you misspell words in your written communications, people may mistrust the quality of your accounting skills. Notethat in the word receipt the “e” comes before the “i” and there is a silent “p” before the “t” at the end of the word.70CHAPTER 4Recording Transactions in a General Journal

raljournalUDIT cedocumentcheck1.In what order are transactions recordedin a journal?receipt2.Why are source documents important?memorandum3.List the four parts of a journal entry.sales invoiceWORKTOGETHERJournalizing entries into a general journalA journal is given in the Working Papers. Your instructor will guide you through the followingexample.Ruth Muldoon owns Muldoon Copy Center, which uses the following accounts:CashPrepaid InsuranceRuth Muldoon, DrawingAccts. Rec.—Lester Dodge Accts. Pay.—Ron’s SuppliesSalesSuppliesRuth Muldoon, CapitalMiscellaneous ExpenseTransactions: Apr. 1. Received cash from owner as an investment, 7,000.00. R1.2. Paid cash for supplies, 425.00. C1.4.Rent ExpenseUtilities ExpenseJournalize each transaction completed during April of the current year. Use page 1 of the journal. Source documents are abbreviated as follows: check, C; memorandum, M; receipt, R; salesinvoice, S; calculator tape, T. Save your work to complete Work Together on page 75.ON YOUROWNJournalizing entries into a general journalA journal is given in the Working Papers. Work this problem independently.Gale Klein owns Klein’s Service Center, which uses the following accounts:CashPrepaid InsuranceGale Klein, DrawingAccts. Rec.—Connie Vaughn Accts. Pay.—Osamu Supply Co. SalesSuppliesGale Klein, CapitalAdvertising ExpenseTransactions: June 2. Received cash from owner as an investment, 1,500.00. R1.3. Paid cash for supplies, 35.00. C1.5.Miscellaneous ExpenseRent ExpenseJournalize each transaction completed during June of the current year. Use page 1 of the journal. Source documents are abbreviated as follows: check, C; memorandum, M; receipt, R; salesinvoice, S; calculator tape, T. Save your work to complete On Your Own on page 75.CHAPTER 4 Recording Transactions in a General Journal71

Journalizing Buying Insurance, Buying on4-2 Account, and Paying on AccountPAID CASH FOR INSURANCE1DateDATE2DebitGENERAL JOURNALACCOUNT TITLE4 Prepaid InsuranceCash56DOC. POST.NO.REF.C2Prepaid Insurance1,200.00CashSourceDocumentPAGEDEBITTEPS1. Date. Write the date, 4, in the Date column.2. Debit. Write the title of the account debited, PrepaidInsurance, in the Account Title column. Write the debit amount, 1,200.00, in the Debit column.3. Credit. On the next line, indented about 1 centimeter, write thetitle of the account credited, Cash, in the Account Title column. Writethe credit amount, 1,200.00, in the Credit column.4. Source document. On the first line of this entry, write the source document number, C2, in the Doc. No. column.R E M E M B E RAll amounts recorded in the general journal must have an account title written in the Account Title column.Recording Transactions in a General Journal6The source document for this transaction isCheck No. 2. (CONCEPT: Objective Evidence) Theanalysis of this transaction is shown in theT accounts.The asset account, Prepaid Insurance, isincreased by a debit, 1,200.00. The assetaccount, Cash, is decreased by a credit, 1,200.00.Journalizing cash paid for insuranceCHAPTER 45CreditFor this entry, the total debits, 1,200.00, equal the total credits, 1,200.00.72CREDIT1 2 0 0 001,200.00S11 2 0 0 003August 4. Paid cash for insurance, 1,200.00.Check No. 2.4

BOUGHT SUPPLIES ON ACCOUNT12DateDATE7DebitGENERAL JOURNALACCOUNT TITLE7 Supplies4DOC. POST.NO.REF.M1SourceDocumentPAGE 1DEBIT2 7 2 0 003August 7. Bought supplies on account fromLing Music Supplies, 2,720.00. MemorandumNo. 1.Supplies2,720.00Accts. Pay.—Ling Music Supplies2,720.00TEPS8Creditaction immediately. Therefore, a memorandumis prepared that shows supplies received onaccount.The source document for this transaction isMemorandum No. 1. (CONCEPT: ObjectiveEvidence) The analysis of this transaction isshown in the T accounts.The asset account, Supplies, is increased by adebit, 2,720.00. The liability account, AccountsPayable—Ling Music Supplies, is increased by acredit, 2,720.00Encore Music ordered these supplies by telephone. Encore Music wishes to record this trans-S72 7 2 0 00Accts. Pay.—Ling Music Supplies8CREDITF YJournalizing supplies bought on account1. Date. Write the date, 7, in the Date column.2. Debit. Write the title of the account debited, Supplies, in theAccount Title column. Write the debit amount, 2,720.00,in the Debit column.3. Credit. On the next line, indented about 1 centimeter, writethe title of the account credited, Accounts Payable—Ling MusicSupplies, in the Account Title column. Write the credit amount, 2,720.00, in the Credit column.4. Source document. On the first line of this entry, write the sourcedocument number, M1, in the Doc. No. column.IOf all servicebusinesses in theUnited States, only 4percent employ 50 ormore people and 80percent have fewerthan 10 employees.For this entry, the total debits, 2,720.00, equal the total credits, 2,720.00.R E M E M B E RWhen recording transactions in a general journal, the account title that is credited is normally indented.CHAPTER 4 Recording Transactions in a General Journal73

PAID CASH ON ACCOUNT1DATE9102DateDebitGENERAL JOURNALACCOUNT TITLE11 Accts. Pay.—Ling Music SuppliesCashDOC. POST.NO.REF.C3Accts. Pay.—Ling Music T1CREDIT1 3 6 0 0091 3 6 0 003August 11. Paid cash on account to LingMusic Supplies, 1,360.00. Check No. 3.410CreditThe source document for this transaction isCheck No. 3. (CONCEPT: Objective Evidence) Theanalysis of this transaction is shown in theT accounts.The liability account, Accounts Payable—LingMusic Supplies, is decreased by a debit, 1,360.00.The asset account, Cash, is decreased by a credit, 1,360.00.MARY WITHERSPOONACCOUNTINGAT WORK74n high school, Mary M.Witherspoon consideredpursuing a degree inaccounting. Her career choice wasconfirmed by ACCUMATION, acareer education program for highschool students sponsored by theDallas Chapter of the Texas Society ofCPAs. Students participate in thisweek-long summer program, whichincludes visits to an internationalaccounting firm and the chance to sitin on university accounting classes.Mary graduated with a BBA inAccounting and works for OryxEnergy Company, a largeindependent producer of oil and gasin Dallas. Currently in gas balancingaccounting, she reconciles records ofjointly owned properties to ensureOryx receives their entitled gasvolumes. Working in the corporateenvironment has allowed Mary toIchange job responsibilities over hercareer to gain additional experience.Mary believes that exceptionalpeople skills coupled with technicalexperience is the formula for businesssuccess. People skills includewritten and verbal communication,respecting diversity, and the abilityto work in teams.Mary also serves as a districtvice-president of the AmericanBusiness Women’s Association(ABWA). ABWA promotes theadvancement of women in business bysponsoring continuing education, providing leadership training, and offering encouragement.“High school students can contacttheir state or local society of certifiedpublic accountants for accountingcareer information,” says Mary. “WeCPAs support programs to encouragestudent interest in our field.”

AUDIT YOURUNDERSTANDING1.When cash is paid for insurance, which account is listed on the first line of the entry?2.When supplies are bought on account, which account is listed on the first line of the entry?3.When supplies are bought on account, which account is listed on the second line of the entry?4.When cash is paid on account, which account is listed on the second line of the entry?WORKTOGETHERJournalizing entries into a general journalUse the journal that you started for Work Together on page 71. Your instructor will guide youthrough the following example.Ruth Muldoon owns Muldoon Copy Center, which uses the following accounts:CashPrepaid InsuranceRuth Muldoon, DrawingAccts. Rec.—Lester DodgeAccts. Pay.—Ron’s SuppliesSalesSuppliesRuth Muldoon, CapitalMiscellaneous ExpenseTransactions: Apr. 5. Bought supplies on account from Ron’s Supplies, 300.00. M1.7. Paid cash for insurance, 600.00. C2.9. Paid cash on account to Ron’s Supplies, 300.00. C3.5.Rent ExpenseUtilities ExpenseJournalize the transactions continuing on the next blank line of page 1 of the journal. Saveyour work to complete Work Together on page 81.ON YOUROWNJournalizing entries into a general journalUse the journal that you started for On Your Own on page 71. Work this problemindependently.Gale Klein owns Klein’s Service Center, which uses the following accounts:CashPrepaid InsuranceGale Klein, DrawingMiscellaneous ExpenseAccts. Rec.—Connie Vaughn Accts. Pay.—Osamu Supply Co. SalesRent ExpenseSuppliesGale Klein, CapitalAdvertising ExpenseTransactions: June 5. Paid cash for insurance, 100.00. C2.9. Bought supplies on account from Osamu Supply Co., 155.00. M1.10. Paid cash on account to Osamu Supply Co., 155.00. C3.6.Journalize the transactions continuing on the next blank line of page 1 of the journal. Saveyour work to complete On Your Own on page 81.CHAPTER 4 Recording Transactions in a General Journal75

4-3Journalizing Transactions That Affect Owner’sEquity and Receiving Cash on AccountRECEIVED CASH FROM SALES12DateDATEDebitGENERAL JOURNALACCOUNT TITLE12 CashSales1112DOC. POST.NO.REF.T12August 12. Received cash from sales, 325.00. Tape No. T1CREDIT3 2 5 00113 2 5 003S4CreditThe source document for this transaction isCalculator Tape No. 12. (CONCEPT: ObjectiveEvidence) The analysis of this transaction isshown in the T accounts.The asset account, Cash, is increased by adebit, 325.00. The revenue account, Sales, isincreased by a credit, 325.00.The reason that Sales is increased by a creditis discussed in the previous chapter. Theowner’s capital account has a normal credit balance. Increases in the owner’s capital accountare shown as credits.Because revenue increases owner’s equity,increases in revenue are recorded as credits. Arevenue account, therefore, has a normal creditbalance.Journalizing cash received from sales1. Date. Write the date, 12, in the Date column.2. Debit. Write the title of the account debited, Cash, in the Account Title column. Write the debit amount, 325.00, in the Debit column.3. Credit. On the next line, indented about 1 centimeter, write the title of the account credited, Sales, in theAccount Title column. Write the credit amount, 325.00, in the Credit column.4. Source document. On the first line of this entry, write the source document number, T12, in the Doc.No. column.For this entry, the total debits, 325.00, equal the total credits, 325.00.R E M E M B E RDon’t forget to record the source document in the Doc. No. column of the general journal.7612CHAPTER 4Recording Transactions in a General Journal

SOLD SERVICES ON ACCOUNT1DateDATE2DebitGENERAL JOURNALACCOUNT TITLE12 Accounts Rec.—Kids TimeSales1314DOC. POST.NO.REF.S1Accts. Rec.—Kids Time200.00Sales200.00TEPSJournalizing services sold on accountPAGEDEBIT1CREDIT2 0 0 001314CreditThe source document for this transaction isSales Invoice No. 1. (CONCEPT: ObjectiveEvidence) The analysis of this transaction isshown in the T accounts.The asset account, Accounts Receivable—KidsTime, is increased by a debit, 200.00. Therevenue account, Sales, is increased by a credit, 200.00.FSSourceDocument2 0 0 003August 12. Sold services on account to KidsTime, 200.00. Sales Invoice No. 1.4YIAccounting is not just for accountants. Forexample, a performing artist earns revenuefrom providing a service. Financialdecisions must be made such as the cost ofdoing a performance, the percentage of revenue paid to a manager, travel expenses,and the cost of rehearsal space.1. Date. Write the date, 12, in the Date column.2. Debit. Write the title of the account debited,Accounts Receivable—Kids Time, in the AccountTitle column. Write the debit amount, 200.00, inthe Debit column.3. Credit. On the next line, indented about 1 centimeter, write the titleof the account credited, Sales, in the Account Title column. Write thecredit amount, 200.00, in the Credit column.4. Source document. Write the source document number, S1, in theDoc. No. column.For this entry, the total debits, 200.00, equal the total credits, 200.00.R E M E M B E RIn double-entry accounting, each transaction affects at least twoaccounts. At least one account will be debited and at least one accountwill be credited.CHAPTER 4 Recording Transactions in a General Journal77

PAID CASH FOR AN EXPENSE1DATEDate2DebitGENERAL JOURNALACCOUNT TITLE12 Rent ExpenseCash12 Utilities ExpenseCash1516171819250.00The source document for this transaction isCheck No. 4. (CONCEPT: Objective Evidence) TheSC4DEBIT2 5 0 00C54 5 003Credit16174 5 001819analysis of this transaction is shown in theT accounts.The expense account, Rent Expense, isincreased by a debit, 250.00. The asset account,Cash, is decreased by a credit.The reason that Rent Expense is increased bya debit is discussed in the previous chapter. Theowner’s capital account has a normal credit balance. Decreases in the owner’s capital accountare shown as debits.Because expenses decrease owner’s equity,increases in expenses are recorded as debits. Anexpense account, therefore, has a normal debitbalance.Journalizing cash paid for an expense1. Date. Write the date, 12, in the Date column.2. Debit. Write the title of the account debited, Rent Expense, in theAccount Title column. Write the debit amount, 250.00, in the Debitcolumn.3. Credit. On the next line, indented about 1 centimeter, write the title ofthe account credited, Cash, in the Account Title column. Write the creditamount, 250.00, in the Credit column.4. Source document. Write the source document number, C4, in theDoc. No. column.CHAPTER 4152 5 0 00For this entry, the total debits, 250.00, equal the total credits, 250.00.Whenever cash is paid for an expense, the journal entry is similar to theentry discussed above. Therefore, the journal entry to record paying cashfor utilities is also illustrated.78CREDIT21CashPDOC. POST.NO.REF.120250.00EPAGE21Rent ExpenseTSourceDocument20August 12. Paid cash for rent, 250.00.Check No. 4.S4Recording Transactions in a General JournalF YISource documentscan be criticallyimportant intracking downerrors. Businesses filetheir sourcedocuments so theycan be referred to ifit is necessary toverify informationentered into theirjournals.

RECEIVED CASH ON ACCOUNT1DateDATE2DebitGENERAL JOURNALACCOUNT TITLE12 CashAccounts Rec.—Kids Time1920DOC. POST.NO.REF.R2Cash100.00Accts. Rec.—Kids Time100.00STEPSSourceDocumentPAGEDEBIT1CREDIT1 0 0 00191 0 0 003August 12. Received cash on account fromKids Time, 100.00. Receipt No. 2.420CreditThe source document for this transaction isReceipt No. 2. (CONCEPT: Objective Evidence)The analysis of this transaction is shown in theT accounts.The asset account, Cash, is increasedby a debit, 100.00. The asset account,Accounts Receivable—Kids Time, isdecreased by a credit, 100.00.Journalizing cash received on account1. Date. Write the date, 12, in the Date column.2. Debit. Write the title of the account debited, Cash, in the AccountTitle column. Write the debit amount, 100.00, in the Debitcolumn.3. Credit. On the next line, indented about 1 centimeter, write thetitle of the account credited, Accounts Receivable—KidsTime, in the Account Title column. Write the creditamount, 100.00, in the Credit column.4. Source document. Write the source documentnumber, R2, in the Doc. No. column.For this entry, the total debits, 100.00, equalthe total credits, 100.00.R E M E M B E RIncreases in expenses and in withdrawals decrease owner’s equity. Decreases in owner’s equity are recorded as debits. Therefore, increases in expenses and in withdrawals are recorded as debits.CHAPTER 4 Recording Transactions in a General Journal79

PAID CASH TO OWNER FOR PERSONAL USE1DateDATE21222DebitGENERAL JOURNALACCOUNT TITLE12 Barbara Treviño, DrawingCashDOC. POST.NO.REF.C6Barbara Treviño, Drawing100.00Cash100.00FORMINGLEGAL ISSUESIN ACCOUNTING80PAGEDEBIT1CREDIT211 0 0 0022CreditThe source document for this transaction isCheck No. 6. (CONCEPT: Objective Evidence) Theanalysis of this transaction is shown in theT

A sales invoice is also referred to as a sales ticket or a sales slip. A sales invoice is prepared in duplicate. The original copy is given to the customer. The copy is used as the source document for the sale on account transaction.(CONCEPT: Objective Evidence) Sales invoices are numbered in sequence. sales invoice