Chapter 5 Journalizing Transactions

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Chapter 5 Journalizing Transactions

• Definitions
• Journal-A form for recording transactions in
  chronological order.(A book of original entry)
• Journalizing-Recording transactions in a journal.
• Special Amount Columns-A journal amount column
  headed with an account title.

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Definitions Continued

• General Amount Column-A journal amount column
  that is not headed with an account title.
• Entry-Information for each transaction recorded
  in a journal.
• Double-Entry Accounting-The recording of debit
  and credit parts of a transaction.
• Source Document-A business paper from which
  information is obtained for a journal entry.

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Definitions Continued

• Check-A business form ordering a bank to pay cash
  from a bank account.
• Receipt-A business form giving written
  acknowledgment for cash received.
• Memorandum-A form on which a brief message is
  written describing a transaction.
• Proving Cash-Determining that the amount of cash
  agrees with the accounting records.

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Chapter Highlights

• Four parts of an entry
• Date
• Debit
• Credit
• Source Document
• Before a transaction is recorded in a journal,
  it must be analyzed into its debit and credit
  parts.

• The terms Debit and Credit are abbreviated at dr
  and cr. These are derived from Latin and Italian
  words debere and credere. Ledgers with debit and
  credit sides became popular in the 17th century
  in Europe

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Proving a Journal Page

• Proving is showing that total debits total
  credits.

• Proving has 3 steps
• 1.Add each of the amount columns.
• 2.Add the debit column totals, and then ad the
  credit column totals.
• 3.Verify that debits credits

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Ruling

• Rule a single line across all amount columns
  directly below the last entry to indicate that
  the columns are to be added.
• On the next line write the date in the date
  column.

• Write words carried forward if bringing totals to
  the top of the next page if final totals enter
  the word totals. Also place a check mark in
  the post reference column(PR)

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Rulings Continued

• On the top of the new page if not final totals
  write Brought Forward in the Account Title Column
  and place a check mark in the PR column.
• Write each column total below the single ruled
  line.

• Rule double lines blow the column totals across
  all amount columns. The double lines mean that
  the totals have been verified.

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Prove Cash

• 1-Cash Balance on hand at beginning of fiscal
  period
• 2Add the cash received during the fiscal
  period(This is usually the cash debit total)

• 3-Subtract cash paid out during the fiscal
  period(Usually the cash credit total)
• 4-Equal the cash on hand at the end of the fiscal
  period.
• 5-Verify that the cash balance the checkbook
  balance.

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General Accounting Practices

• Errors are corrected in a way that does not cause
  doubts about whether the information is correct.
  Draw a neat line through an error and write the
  correction above the cancelled item.
• Words in accounting record are written in full
  when space permits. All items need to be
  legible. Only abbreviate when space is limited.

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Practices Continued

• Dollars and cents signs and decimal points are
  not used when writing amount on ruled account
  paper.
• Two zeros are written in the cents column when an
  amount is in even dollars otherwise doubts may
  arise as to amounts.

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Practices Continued

• A single ruled line indicates addition or
  subtraction.
• A double ruled line indicates totals are verified
  and correct.
• Neatness is important and rulers should be used
  to make rulings.