CHAPTER 4
Identifying the Bookkeeping Base of Accounting
Topic 1: Originating Transaction Data
Topic 2: Journalizing Transaction Data
Topic 3: Posting Transaction Data
Topic 4: Preparing Accounting Proofs
Topic 5: Applying the Electronic Spreadsheet
Topic 1: Originating Transaction Data
Accounting Cycle:
Accountants need tangible and objective proof that a business transaction has taken place to
record any financial event.
Accountants then record business transactions given information from “source documents,” on
the basis of the objectivity principle.
Objectivity Principle:
Source Documents:
The First Balance Sheet

Details of assets, liabilities, and owner's equity are presented in the first balance sheet.

This becomes a source documents at the date when the owner begins his or her business

Then a T-account is opened for each asset and liability, and also for the owner's Capital
account as at the opening balance sheet date
The Invoice

When a business buys an asset either with cash or on credit, the seller completes a bill of
sale often called the sales invoice or simply the invoice.
Purchase Invoice:
Sales Invoice:
Sales Invoice (seller)
Invoice - $1500
Ryan Equipment
Purchase Invoice (buyer)
J. Emery Real Estate
Office Equipment
J. Emery purchased office
__________________________
equipment on account from Ryan
Equipment. Fill out the
necessary T- Accounts
Acct.Rec/ J. Emery
__________________________
Sales
Acct.Pay/Ryan Equipment
__________________________
__________________________
The Cheque Record
The Remittance Slip
CHAPTER QUESTIONS
PROBLEMS 4-1, 4-2
MINI CASES 4-3
/15
/5
Topic 2: Journalizing Transaction Data
Review:
You have learned to record the debits and credits for each business transaction directly in a TAccount ledger

Several disadvantages to recording debits and credits only in the ledger:
To overcome the disadvantages accounts use journals before the debits and credits are entered
into the ledger account (T-Account Ledger).
Journal:
Many different kinds of journals:
General Journal (simple way):
Journalizing:
You first learn how to do if manually then we will move to electronic spreadsheets then
accounting software.
Journalizing, follows taking information from source documents and its the second step in the
accounting cycle.
Journalizing: An Illustration
Page 117
Hand out the General Journal Sheet and a blank T-Account Sheet.
Do it together
Illustrating Journal Entries
Page 119 – 120
Handout General Journal Sheets
Do together as a class
Following points will help you:

Journal pages numbered consecutively.

Date column - taken from the source document, the date in the journal is also the date of
the transaction document. If there were no source document, the date in the journal would
become the date of the transaction.

A line is skipped after each entry. Helps makes entries stand out.

The first entry is known as the opening entry because it identifies the accounts that open
a set of accounting records for a beginning balance sheet of the new business.
Opening entry:
Compound entry:
Only complete journal entries are shown on a journal page. A transaction is not recorded
unless there are enough lines to journalize all of it, including the brief explanation. This is for
the reader's convenience. Leave the extra lines.

How to make a correction?

Examining Advantages of the Journal
1.
2.
3.
4.
5.
6.
******PROBLEMS
*******MINI CASES
P 4-4, 4-5, 4-6*******
Pick two out of the three*******