Journalizing Transactions Flashcards
4.3: Journalize transactions in the general journal.
What provides evidence of a transaction?
Evidence comes from source documents like a sales receipt, cheque, invoice, or cash register tape.
Why is analyzing transactions so important in accounting?
Analyzing transactions is critical because it helps determine which accounts are affected and by how much. This is the foundation of the accounting process.
How do most companies process transactions today?
Most companies use computerized accounting systems ranging from simple spreadsheets (like Excel) to more complex integrated software (like that used by True Büch Kombucha).
What role does a person play in analyzing transactions?
A person is responsible for analyzing transactions to ensure accurate identification of affected accounts and amounts, especially in the manual accounting system.
What is a general journal?
The book of original entry in which transactions are recorded in chronological (date) order.
What is the second step in the accounting cycle?
The second step is to record accounting transactions in a general journal.
Why isn’t it practical to enter transaction data directly into T accounts?
It’s more efficient to record transactions in a general journal because it organizes the transaction data chronologically and fully, making it easier to track and review.
What does a general journal include?
A general journal includes the debit and credit effects on specific accounts for each transaction, as well as a complete explanation and reference to the source document (when applicable).
What is the most basic form of a journal?
A general journal
What are the 3 key benefits of using a general journal?
- Discloses the complete effect of a transaction in one place.
- Provides a chronological record of transactions.
- Helps prevent and locate errors by comparing debit and credit amounts.
What is the process of entering transaction data into the general journal called?
The process is called journalizing.
How do you determine the debits and credits for a journal entry?
A debit–credit analysis helps identify which accounts need to be debited or credited
What are the key features of a journal entry?
- Date of the transaction is recorded.
- The debit account is listed first on the left, and the credit account is indented below it on the next line.
- Debit amounts are recorded in the -Debit column, and credit amounts are in the Credit column.
- A brief explanation of the transaction is included.
- A reference (to an invoice/receipt, etc.)
What is the difference between a simple and a compound journal entry?
A simple journal entry affects only two accounts: one debit and one credit.
A compound journal entry involves three or more accounts.
What must always be true about the debit and credit amounts in a journal entry?
The total debit amount must always equal the total credit amount.
Why is it important to use specific account titles in journal entries?
Using correct and specific account titles ensures accurate and consistent financial reporting. For example, using multiple similar titles like “Automobiles” and “Trucks” can cause confusion.
When journalizing, should you use explanations for each entry?
Explanations are important and should not be part of account titles
