Accounting Chapter 6
- Journal: a form for recording transactions in chronological order SAMPLE
- Journalizing: recording transactions in a journal
- Special amount column: a journal amount column with an account title. These are used for frequently occurring transaction; eliminates writing the account title every time.
- General amount column: a journal account column that is not headed with an account title
- Entry: a transaction recorded in a journal
- Double-entry accounting: recording the debit and credit parts of a transaction
- Each transaction affects at least two accounts.
- Assures that debits equal credits.
Source documents: the original record of a transaction, such as receipts, cancelled checks, pay-stubs, invoices, etc.
- Provide information for journal transactions.
- Needed to provide objective evidence that the transaction took place.
- May be needed for tax preparation and business and tax audits.
Sample source documents:
- Checks: a business form ordering a bank to pay cash from a bank account
- The source document for the receiver of cash payments is a check.
- The course document for the check writer is the check stub.
- Sales invoice: a form describing what is being sold along with the quantity and price.
- Used as the source document for a sale made on account.
- Also called "sales ticket" or "sales slip".
- Receipts: a business form giving written acknowledgement for cash received.
- A receipt is the source document for cash received from transactions other than sales.
- Memorandum: form with a brief message describing a transaction
- When no other source document is prepared for a transaction, or when additional explanation is needed about a transaction, a memorandum is used.
- Calculator Tapes: a source document which totals of all the individual sales for a day; a record of a whole day’s sales.
Four parts of a journal transaction
- Date. Write the year and month for the first entry on a journal page. Other entries just require you to enter the day of the posting.
- Debit. If you are posting a debit to Cash, write the amount in the Debit Cash column. If the account to be debited is not a special account such as Cash (already on the page) write the name of the account under Account Title column, then enter the amount in the General Debit column.
- Credit. If you are posting a credit to Cash, write the amount in the Credit Cash column. If the account to be credited is not a special account such as Cash (already on the page) write the name of the account under Account Title column, then enter the amount in the General Credit column.
- Source document. Write the source document number in the Doc. No. column. For example, if it is Receipt Number 1, write R1; if the source document is Check Number 426, write C426.
Note: When you are recording numbers in a journal, you do not need to write dollar signs, decimal points or commas.
Proving a Journal
Ruling a Journal
Proving a journal is done to double check accuracy on the additional and subtraction of your debits and credits. Each journal page should be proved before a new page is started. Companies may also choose to prove a journal at the end of each month.
Steps to proving a journal page:
- Total each amount column.
- Total the debit and credit columns.
- Verify that total debits and total credits equal each other.
Ruling a journal page adds clarity to your work. Use a straight edge for neat work.
- Single lines separate the numbers being totaled from their totals.
- Double lines indicate totals.
- Journal pages are ruled at the end of each month even if they are not full.
Steps for ruling a journal page:
- Rule a single line across all amount columns directly below the last entry.
- One the next line write the current date in the date column.
- Write the words Carried Forward in the Account Title column and put a check mark in the Post. Ref. column.
- Write each column total below the single line.
- Rule double lines below the column totals across all amount columns.
Starting a New Journal Page
Totals from each page must be written at the start of each new page.
Steps for starting a new journal page:
- Write the page number at the top of the journal page.
- Write the year, month, and day in the date column.
- Write Brought Forward in the Account Title column, and place a check mark in the Post. Ref. column
- Record the column totals brought forward from the previous page.
Proving cash is determining that the amount of cash agrees with the accounting record to make sure the record is accurate.
- Cash can be proved at any time.
- It is good to check all your sources when proving cash.
Steps to proving cash:
- Calculate the cash balance
- Verify that the cash balance equals the checkbook balance on the next unused check stub in the checkbook.
Ruling a Journal at the End of the Month. A journal is ruled at the end of each month even if the last journal page is not full.
- Under the last entry on the page, rule a single line across all amount columns.
- On the next line, write the date in the date column
- Write the word Totals in the Account Title column.
- Write each column total below the single line
- Rule double lines below the column totals across all amount columns. The double lines mean that the totals have been verified as correct.