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Chapter 4
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Learning Objectives
1. Describe the standard form of a twocolumn journal.
2. Record business transactions in a twocolumn journal.
3. Prepare a chart of accounts.
4. Describe the balance form of account.
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Learning Objectives
5. Post from a two-column journal to ledger accounts.
6. Prepare a trial balance from a ledger after posting.
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Sequence of steps and procedures
Used to record and summarize accounting data during an accounting period
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Step 1 Analyze transactions from source documents.
Step 2 Record transactions in a journal.
Step 3 Post from the journal to the ledger.
Step 4 Prepare a trial balance of the ledger.
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Business documents or papers that prove business transactions
The basis for journal entries
Provide objective evidence to support the journal entries
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Learning Objective 1
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A record in which business transactions are recorded in the order that they occur
AKA book of original entry
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1. Numbered pages, beginning with page 1
2. A
column to record transaction date
3. An
column
 To record the accounts affected
 To record a brief explanation
4. A posting reference ( P.R.
) column
5. Two money (or amount) columns
 Labeled
and
, respectively
 Used to record the dollar amount
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1. Page number
2. A Date column
3. An Account Title column
4. A Posting Reference (P.R.) column
5. Debit and Credit columns
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Quick Check
The sequence of steps and procedures used by a business to record and summarize accounting data is known as the a. accounting cycle.
b. balance form of account.
c. book of original entry.
d. accounting period.
e. principle of materiality.
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Learning Objective 2
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Analyze into its debit and credit parts.
For each transaction, you must decide:
 Which accounts are affected by the transaction
 Were the accounts increased or decreased
 How to increase or decrease (debit or credit the accounts affected
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Provide a brief explanation for each journal entry.
Notes telling someone not trained in accounting what occurred in a transaction.
Writing them will reinforce your understanding of transactions.
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???
When making journal entries, which is listed first?
Account being debited is
listed first
Credit follows, indented
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No set format
Should be brief and easy to understand
Optional: may be omitted if purpose of entry is obvious
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Example
Alice Browning starts an accounting and tax business by investing $5,000 in the business on January 1, 20X1.
Analyze the account to be debited and the account to be credited.
Cash, an asset account, is increasing.
Assets are increased with debits.
Alice Browning, Capital, an equity account, is increasing.
Equity accounts are increased with credits.
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Example
Alice Browning starts an accounting and tax business by investing $5,000 in the business on January 1, 20X1.
Date
20X1
Jan.
1 Cash
General Journal
Account Title P.R.
Debit
5,000
Alice Browning, Capital
Invested cash in the business.
Credit
5,000
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Review Quiz 3-1
Record each transaction in a general journal. Omit the explanations.
Mar. 1, Becky invested $7,000 cash in her business.
General Journal
Date
20XX
Mar.
1 Cash
Account Title
Becky McAfee, Capital
P.R.
Debit
7,000
Credit
7,000
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Review Quiz 3-1
Record each transaction in a general journal. Omit the explanations.
Mar. 4, purchased supplies on credit, $750.
General Journal
Date
20XX
Mar.
Account Title
4 Supplies
Accounts Payable
P.R.
Debit
750
Credit
750
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Review Quiz 3-1
Record each transaction in a general journal. Omit the explanations.
Mar. 6, purchased equipment for cash, $475.
General Journal
Date
20XX
Mar.
Account Title
6 Equipment
Cash
P.R.
Debit
475
Credit
475
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Review Quiz 3-1
Record each transaction in a general journal. Omit the explanations.
Mar. 9, paid half of the amount owed for supplies,
$375.
General Journal
Date
20XX
Mar.
Account Title
9 Accounts Payable
Cash
P.R.
Debit
375
Credit
375
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Entry requiring three or more accounts
Total debits will equal the total credits regardless of the number of accounts involved in the journal entry
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Example
On July 25, 20X1, Susan King purchases equipment for $10,000 by making a down payment of $3,500 with the balance on account.
Analyze the account(s) to be debited and the account(s) to be credited.
Equipment, an asset account, is increasing.
Assets are increased with debits.
Cash, an asset account, is decreasing.
Assets are decreased with credits.
Accounts Payable, a liability account, is increasing.
Liabilities are increased with credits.
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Example
On July 25, 20X1, Susan King purchases equipment for
$10,000 by making a down payment of $3,500 with the balance on account.
Analyze the account(s) to be debited and the account(s) to be credited.
Date
20X1
Jul.
25 Equipment
Cash
General Journal
Account Title
Accounts Payable
Purchased equipment with a down payment and the balance on account.
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P.R.
Debit
10,000
Credit
3,500
6,500
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Provides a chronological (by order of date) record of transactions
Provides a place to make an explanation of an entry, if needed
Use lessens the possibility of recording an error, because both the debit and credit parts are recorded together
Easier to locate recording errors
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Quick Check
The process of recording transactions in a journal is called a. dailying.
b. transitioning.
c. journalizing.
d. footing.
e. ledgering.
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Review Quiz 3-2
Record each transaction in a general journal. Omit
Explanations.
Jun. 12, paid utilities expense, $145.
General Journal
Date
20X1
Jun.
Account Title
12 Utilities Expense
Cash
P.R.
Debit
145
Credit
145
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Review Quiz 3-2
John Dark’s business had the following transactions in
June 20X1. Record each transaction in a general journal. Omit Explanations.
Jun. 17, John withdrew cash for personal use, $175.
General Journal
Date
20X1
Jun.
Account Title
17 John Dark, Drawing
Cash
P.R.
Debit
175
Credit
175
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Review Quiz 3-2
John Dark’s business had the following transactions in
June 20X1. Record each transaction in a general journal. Omit Explanations.
Jun. 22, received cash for services performed, $950.
General Journal
Date
20X1
Jun.
22 Cash
Account Title
Service Revenue
P.R.
Debit
950
Credit
950
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Review Quiz 3-2
John Dark’s business had the following transactions in
June 20X1. Record each transaction in a general journal.
Omit Explanations.
Jun. 25, John made the following additional investments in his business: office supplies, $75; and a truck, $4,000.
General Journal
Date
20X1
Jun.
Account Title
25 Office Supplies
Truck
John Dark, Capital
P.R.
Debit
75
4,000
Credit
4,075
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Learning Objective 3
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A listing of all accounts and their account numbers
Account
Category
Assets (100-199)
A directory of accounts available for making journal entries
Liabilities (200-299)
Owner’s Equity
(300-399)
Includes only account titles that may be used when recording transactions in the journal
Revenue (400-499)
Expenses (500-599)
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Account
Number
111
112
113
116
117
211
311
312
411
511
512
Account
Title
Cash
Accounts
Receivable
Office
Supplies
Office
Equipment
Office
Furniture
Accounts
Payable
Stanley
Walker,
Capital
Stanley
Walker,
Drawing
Service
Revenue
Rent Expense
Repairs
Expense
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Quick Check
A directory or listing of accounts available in the ledger is referred to as the a. book of final entry.
b. book of original entry.
c. source document.
d. chart of accounts.
e. balance form of account.
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Learning Objective 4
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A record for each item in a business
The balance form of an account includes a
 Debit column
 Credit column


Debit Balance column
Credit Balance column
The four-column ledger account form shows a running balance of each account
Ledger accounts not footed and balanced
Balance form of account widely used
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Quick Check
The ledger is often referred to as the book of a. final entry.
b. numbers.
c. balances.
d. original entry.
e. materiality.
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Learning Objective 5
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1
1. The date of the journal entry is recorded in the Cash account.
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2
2. The Cash account is debited for 10,000.
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3
3. The page number of the journal entry is recorded in the P.R. column of the Cash account.
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4
4. The account number is recorded in the journal.
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5
5. Since this is the first number posted to the Cash account, the balance is 10,000 and is recorded in the balance debit column.
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1
1. The date of the journal entry is recorded in the
Owner’s Capital account.
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2
2. Stanley Walker, Capital is credited for 10,000.
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3
3. The page number of the journal entry is recorded in the
P.R. column of the Stanley Walker, Capital account.
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4
4. The account number is recorded in the journal.
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5
5. Since this is the first number posted to the Stanley
Walker, Capital account, the balance is 10,000 and is recorded in the Balance Credit column.
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Quick Check
Which of the following represents the correct order of the first four steps of the account cycle? a. Analyze transactions, journalize, post to ledger, prepare trial balance b. Journalize, analyze transactions, post to ledger, prepare trial balance c. Analyze transactions, post to ledger, journalize, prepare trial balance d. Journalize, post to ledger, analyze transactions, prepare trial balance e. Journalize, post to ledger, prepare trial balance, analyze transactions
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Learning Objective 6
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Not a formal financial statement
A test of the equality of debits and credits in the ledger
The order of accounts is consistent with the order on the financial statements and the chart of accounts
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The purpose of the trial balance is to prove the equality of the debits and credits.
Walker and Associates
Trial Balance November 30, 20X1
Account Title
Cash
Accounts Receivable
Office Supplies
Office Equipment
Office Furniture
Accounts Payable
Stanley Walker, Capital
Debit
9,525
300
125
3,000
2,000
Credit
4,000
10,000
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The purpose of the trial balance is to prove the equality of the debits and credits.
Walker and Associates
Trial Balance November 30, 20X1
Account Title Debit
8,000 Stanley Walker, Drawing
Service Revenue
Rent Expense
Repairs Expense
Totals
400
50
16,200
Credit
2,200
16,200
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Quick Check
The four-column account form contains each of the following columns except the a. Debit Balance column b. Credit Balance column c. Credit column d. Debit column e. Difference column
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Review Quiz 3-3
Prepare a trial balance for the following accounts.
Account
Accounts Payable
Cash
Equipment
LeAnn Lovering, Capital
LeAnn Lovering, Drawing
Rent Expense
Repairs Expense
Revenue from Services
Salaries Expense
Supplies
Truck
Utilities Expense
Balance
$ 7,210
1,400
16,400
14,600
700
3,000
450
16,380
2,510
3,860
9,400
470
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Review Quiz 3-3
Answer:
LeAnn’s TV Repair Shop
Trial Balance December 31, 20XX
Cash
Supplies
Equipment
Truck
Accounts Payable
LeAnn Lovering, Capital
LeAnn Lovering, Drawing
Revenue from Services
Account Title
Rent Expense
Salaries Expense
Utilities Expense
Repairs Expense
Totals
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Debit
1,400
3,860
16,400
9,400
700
3,000
2,510
470
450
16,200
Credit
7,210
14,600
16,380
16,200
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Focus on Ethics
Refer to the Focus on Ethics box on page 109 in your text.
Why do you believe the plastic surgeon kept his job at the clinic even though he admitted that he had stolen several hundred thousands of dollars?
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Joining the Pieces
The First Four
Steps in the
Accounting Cycle
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