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Recording Transaction

The document describes the accounting cycle and process of journalizing business transactions. It explains that transactions are initially recorded in chronological order in a journal, which shows the debit and credit effects on specific accounts. Journal entries contain the date, accounts and amounts debited/credited, and an explanation. The journal is used to transfer information to ledger accounts. Entries can be simple, involving two accounts, or compound, involving three or more accounts. Sample transactions are provided to demonstrate journalizing entries.

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Ian Belmonte
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177 views8 pages

Recording Transaction

The document describes the accounting cycle and process of journalizing business transactions. It explains that transactions are initially recorded in chronological order in a journal, which shows the debit and credit effects on specific accounts. Journal entries contain the date, accounts and amounts debited/credited, and an explanation. The journal is used to transfer information to ledger accounts. Entries can be simple, involving two accounts, or compound, involving three or more accounts. Sample transactions are provided to demonstrate journalizing entries.

Uploaded by

Ian Belmonte
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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PART 2: RECORDING BUSINESS

TRANSACTIONS
Accounting Cycle
1. Identification of events to be recorded
2. Transactions are recorded in a Journal
3. Journal Entries are recorded to the Ledger
4. Preparation of a Trial Balance
5. Preparation of a Worksheet including Adjusting
Entries
6. Preparation of Financial Statements
7. Adjusting Entries are Journalized and Posted
8. Closing Journal Entries are Journalized and Posted
9. Preparation of a Post-Closing Trial Balance
10. Reversing Journal Entries are Journalized (Optional)
The Journal
• Companies initially record transactions in chronological
order (the order in which they occur). Thus, the journal is
referred to as the book of original entry. For each
transaction, the journal shows the debit and credit effects
on specific accounts. Companies may use various kinds of
journals, but every company has the most basic form of
journal, a general journal.

JOURNALIZING
• Entering transaction data in the journal is known as
journalizing. Companies make separate journal entries for
each transaction. A complete entry consists of (1) the date
of the transaction, (2) the accounts and amounts to be
debited and credited, and (3) a brief explanation of the
transaction.
CONTENTS OF THE GENERAL JOURNAL

GENERAL JOURNAL

DATE Account Titles and Explanations PR DEBIT CREDIT


• The date of the transaction is entered in the Date column.
• The debit account title (that is, the account to be debited)
is entered first at the extreme left margin of the column
headed “Account Titles and Explanation,” and the amount
of the debit is recorded in the Debit column.
• The credit account title (that is, the account to be credited)
is indented and entered on the next line in the column
headed “Account Titles and Explanation,” and the amount
of the credit is recorded in the Credit column.
• A brief explanation of the transaction appears on the line
below the credit account title. A space is left between
journal entries. The blank space separates individual
journal entries and makes the entire journal easier to read.
• The column titled PR. (which stands for Posting Reference)
is left blank when the journal entry is made. This column is
used later when the journal entries are transferred to the
ledger accounts.
SIMPLE AND COMPOUND ENTRIES

• Some entries involve only two accounts, one


debit and one credit. An entry like these is
considered a simple entry. Some transactions,
however, require more than two accounts in
journalizing. An entry that requires three or
more accounts is a compound entry.
TRANSACTIONS ARE JOURNALIZED (STEP 2)
Sample Transactions

January 2016
1 Galiciano Del Mundo invested P100,000 in his advertising
agency.
1 Galiciano Del Mundo issued a promissory note for a P30,000
loan from Monte Bank. The note carries a 20% interest per
annum. Both interest and the principal are payable in full one
year.
2 Rented office space paying two month’s rent in advance,
P8,000.
4 Acquired art equipment for P42,000 in cash.
5 Acquired office equipment from Fair and Square for P30,000;
paying P15,000 in cash and the balance next month.
8 Purchased on credit art supplies for P18,000 and office
supplies for P8,000 from Batangas Supply.
8 Paid P4,800 to Prudent Insurance Inc. for a one-year insurance
policy with coverage effective Jan. 1
9 Paid Batangas Supply P10,000 of the amount owed.
10 Performed services for a car dealer and collected fees
of P14,000.
12 Paid the secretary’s salary P6,000.
15 Accepted P10,000 as an advance fee for art work to be
done for another agency.
19 Performed services by placing print advertisements for
Laurel Arcade, and charged P28,000.
25 Del Mundo withdrew P14,000 for personal expenses.
26 Paid the secretary two more week’s salary, P,6000.
29 Paid the electricity bill of P1,000
30 Received GLOSMARTEL telephone bill, P900.
31 Collected P10,000 on account from Laurel Arcade for
services already rendered.

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