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Accounting: Using The Journal
The transactions of a business are first recorded
in a journal, after which the information is transferred to
the business's accounts. A general journal is a business document
in which the data of the transaction is recorded, including
the amounts of the debit and credit entries and an explanation
of each transaction.
In a manual accounting system the general journal is a book
of columnar pages. A general journal can be used to record
all types of transactions. Many businesses have a number of
special journals, each of which is designed for recording a
particular type of business transaction. For example, one special
journal is the cash receipts journal used to record all receipts
of cash, checks, and money orders.
A. journal entry is the recorded information
for each transaction. Journalizing is the act of preparing
the journal entry. A journal
is often referred to as the document of original entry because
each transaction is first, or originally, entered in the journal.
(Before the use of computers became so widespread, a journal
was called the book of original entry, but because a journal
today may be stored on a computer disk, the term "document" is
more appropriate than "book.")
There are many advantages to using a journal
when initially recording a business's transactions. First,
use of a journal
helps to prevent errors. Because the accounts and the debit
and credit amounts for each transaction are initially recorded
on a single journal page rather than directly in the many accounts,
this method makes it easier to prove that the debits and credits
are equal. Second, all of the information about each transaction
(including the explanation) is recorded in one place, thereby
providing a complete "picture" of the transaction.
Finally, because the transactions are recorded chronologically
(day by day), the journal also provides a chronological "history" of
the business's financial transactions.
In the journalizing process each transaction is initially
entered in one record, the journal, to:
- Minimize
errors
- Have
all the debit and credit information for each transaction
in one place
- Have
a chronological list of all of the business's financial
transactions.
However, the accounting information from each transaction
is not yet recorded in the accounts, the so-called storage
units for the accounting information. Thus, we must post the
accounts from the journal to the ledger accounts. Posting is
the process of transferring the debit and credit information
for each journal entry to the proper accounts in the general
ledger.
To fully understand the relationship between the accounting
equation, a debit and credit rule, and the double entry rule,
recall that the accounting equation must always be in balance.
Also keep in mind that when recording a transaction, it is
not always necessary to affect both sides of the equation or
even two components of the equation. It is possible to record
a transaction as affecting only the left side, the right side,
or both sides of the equation, provided that the equation remains
in balance.
# # # # # SolveYourProblem.com : 2007
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