THE JOURNAL, LEDGER AND POSTINGS
Account: A record used to summarize all increases and decreases in a particular
asset, such as Cash, or any other type of asset, liability, owners’ equity, revenue or
expense.
Ledger- An accounting system includes a separate record for each item that
appears in the financial statements. Collectively, these records are referred to as a
company’s ledger.
Double Entry Accounting System: Every business transaction is recorded by two
types of entries: (1) debit entries to one or more accounts and (2) credit entries to
one or more accounts. In recording any transaction the total amount of debit
entries must equal the total amount of credit entries.
T Accounts:
1. Investment by Owner: Chuck invests $30,000 cash in Fast Forward on December 1.
(1 )
Cash
30,000
Chuck, Capital
(1 )
30,000
2. Purchase Supplies for Cash: Fast Forward pays $2,500 cash for supplies
(1)
Cash
30,000 (2)
2,500
(2)
Supplies
2,500
3. Purchase Equipment for Cash: Fast Forward pays $26000 cash for equipment.
(1)
Cash
30,000 (2)
(3)
2,500
26,000
(3)
Equipment
26,000
4. Purchase Supplies on Credit: Fast Forward purchases $7,100 of supplies on credit.
Accounts payable
(4)
7,100
(2)
(4)
Supplies
2,500
7,100
5. Provide Services for Cash: Fast Forward provides consulting services and immediately
collects $4200 cash.
(1)
(5)
Cash
30,000 (2)
4,200 (3)
2,500
26,000
Consulting Service Revenue
(5)
4,200
6. Payment of Expense in Cash: Fast Forward pays $1000 cash for December rent.
(1)
(5)
Cash
30,000 (2)
4,200 (3)
(6)
2,500
26,000
1,000
(6)
Rent expense
1,000
7. Payment of Expense in Cash: Fast Forward pays $700 cash in employee wages.
1
5
Cash
30,000 2
4,200 3
6
7
2,500
26,000
1,000
700
7
Salaries Expense
700
8. Provide Consulting and Rental Service on Credit: Consulting services of $1600 and
Rent $300.
(8)
Accounts Receivable
1,900
Consulting Service Revenue
(5)
4,200
(8)
1,600
Rent Revenue
(8) 300
9. Receipt of Cash on account: Fast Forward receives $1900 cash from the client billed in
transaction 8.
(1)
(5)
(9)
Cash
30,000 (2)
4,200 (3)
1,900 (6)
(7)
2,500
26,000
1,000
700
(8)
Accounts Receivable
1,900 (9)
1,900
10. Partial payment of accounts payable: Fast Forward pays CalTech Supply $900 cash
toward the payable of transaction 4.
(1)
(5)
(9)
Cash
30,000 (2)
2,500
4,200 (3) 26,000
1,900 (6)
1,000
(7)
700
(10)
900
(10)
Accounts payable
900 (4)
7,100
11. Withdrawal of Cash by Owner: Chuck withdraws $600 cash from Fast Forward for
personal expenses.
(1)
(5)
(9)
Cash
30,000 (2)
2,500
4,200 (3) 26,000
1,900 (6)
1,000
(7)
700
(10)
900
(11)
600
Chuck, Withdrawings
(11)
600
12. Receipt of Cash for Future Services: Fast Forward receives $3000 cash in advance of
providing consulting services to a customer.
(1)
(5)
(9)
(12)
Cash
30,000 (2)
2,500
4,200 (3) 26,000
1,900 (6)
1,000
3,000 (7)
700
(10)
900
(11)
600
Unearned Consulting Revenue
(12)
3,000
13. Pay Cash for Future Insurance Coverage: Fast Forward pays $2400 Cash for a 2 year
insurance policy.
(1)
(5)
(9)
(12)
Cash
30,000 (2)
2,500
4,200 (3) 26,000
1,900 (6)
1,000
3,000 (7)
700
(10)
900
(11)
600
(13) 2,400
(13)
Prepaid Insurance
2,400
14. Purchase Supplies for Cash: Fast Forward pays $120 cash for supplies.
(1)
(5)
(9)
(12)
Cash
30,000 (2)
2,500
4,200 (3) 26,000
1,900 (6)
1,000
3,000 (7)
700
(10)
900
(11)
600
(13) 2,400
(14)
120
(2)
(4)
(14)
Supplies
2,500
7,100
120
15. Payment of Expense in Cash: Fast Forward pays $230 cash for December utilizes.
(1)
(5)
(9)
(12)
Cash
30,000 (2)
2,500
4,200 (3) 26,000
1,900 (6)
1,000
3,000 (7)
700
(10)
900
(11)
600
(13) 2,400
(14)
120
(15)
230
(15)
Utilities Expense
230
16. Payment of Expense in Cash: Fast Forward pays $700 cash in employee wages.
(1)
(5)
(9)
(12)
Cash
30,000 (2)
2,500
4,200 (3) 26,000
1,900 (6)
1,000
3,000 (7)
700
(10)
900
(11)
600
(13) 2,400
(14)
120
(15)
230
(16)
700
(7)
(16)
Salaries Expense
700
700
Journal- A chronological record of transactions, showing for each transaction the debits
and credits to be entered in the specific ledger accounts.
It has 4 columns as shown below:
GENERAL JOURNAL
Date
Account Titles and Explanations
Mar 19 Accounts Receivable
Legal Fees Earned
Drafted trust agreement for Patrick Stewart
payment due within 30 days.
Debit
1,200
Credit
1,200
May 15 Jean Rodenburry, Drawing
Cash
Owner withdrew cash for personal use.
6,000
May 31 Process Service Expense
Accounts payable
Received bill from Lawyers’ Delivery Service,
payable June 10.
2,050
June 9 Accounts Payable
Cash
Paid amount owed Lawyers’ Delivery Service
2,050
Dec 31 Depreciation Expense: Law Library
Accumulated Depreciation
To record annual depreciation expense on Law
Library.
5,100
Dec 31 Supplies Expense
Supplies
To record supplies expense for the fourth
quarter.
3,750
6,000
2,050
2,050
5,100
3,750
Posting- The process of transferring information from the journal to individual accounts.
GENERAL JOURNAL
Date
Account titles& explanations
Debit Credit
Jan 1 Building
1,000
Cash
1,000
To record the purchase of the building.
Date
Jan 1
GENERAL LEDGER
Building
Debit
1,000
Credit
Cash
Date
Jan 1
Debit
Credit
1,000
Exercise 3.9
Part (a)
Mar 19 Accounts Receivable
Legal Fees Earned
Drafted trust agreement for Patrick Stewart
payment due within 30 days.
1,200
1,200
May 15 Jean Rodenburry, Drawing
Cash
Owner withdrew cash for personal use.
6,000
May 31 Process Service Expense
Accounts payable
Received bill from Lawyers’ Delivery Service,
payable June 10.
2,050
June 9 Accounts Payable
Cash
Paid amount owed Lawyers’ Delivery Service
2,050
Dec 31 Depreciation Expense: Law Library
Accumulated Depreciation
To record annual depreciation expense on Law
Library.
5,100
Dec 31 Supplies Expense
Supplies
To record supplies expense for the fourth
quarter.
3,750
6,000
2,050
2,050
5,100
3,750
b) The transaction on May 15 (withdrawal of cash by owner) has NO effect
upon the net income of the business. This transaction does not constitute an
expense of the business, but a return of a portion of equity to the owner. This
transaction reduces the owners’ equity in the firm.