Basic Accounting Journal Entries
Content
Basic Accounting Journal Entries
Previous lesson: The Accounting Cycle Next lesson: Accounting Journals
The journal is the book of first entry. It used to be an actual book that the bookkeeper would use to make accounting entries. These days bookkeepers enter transactions on the computer using an accounting program. Our recording in the journal is also called a journal or a journal entry.
The journals look like this:
Does this look at all familiar? It should – we have been doing this throughout the previous section on double-entry accounting. Journals are simply debits and credits in chronological (date) order. The purpose of journals is to keep a day-to-day record of a business and its transactions.
Each transaction also requires a brief explanation of the transaction (below the debit and credit). This explanation should accurately describe what took place, so that anyone who glanced at it for the first time could easily identify what occurred. Each journal can also be matched to the relevant supporting document (such as a check stub or a receipt) by use of a cross-referencing code or folio number. This code or folio number simply cross-references between one document and another. If the first transaction above of $15,000 capital was made by issuing check number 38, then one could write ‘Ch-38’ (for example) under the folio number.
Using the folio number to match a journal entry to a source document would enable a person to easily trace the recorded transaction back to the source document and verify that the transaction actually took place (as evidenced by the source document). Journals may also often include a cross-referencing code or folio number to crossreference between the journal entries and the accounts (the next step). Each specific item, such as bank, would have its own folio number, and this would be used to cross-reference from the journal entry involving ‘bank’ to the banks’ account in the ledger (this will be covered in the next section). The folio numbers make it simple to trace information through the steps in the accounting cycle. These cross-referencing numbers or codes would work like this:
‘Sal-1’ is the individual code for the ‘salaries’ account. ‘J-1’ is the code for ‘journal page 1’. One could thus follow information from the journal entry to an account in the ledger, or from an account in the ledger back to the journal entries. There are actually various different types of journals, and in our next lesson we're going to see what they look like and how they work.
Previous lesson: The Accounting Cycle Next lesson: Accounting Journals
The journal is the book of first entry. It used to be an actual book that the bookkeeper would use to make accounting entries. These days bookkeepers enter transactions on the computer using an accounting program. Our recording in the journal is also called a journal or a journal entry.
The journals look like this:
Does this look at all familiar? It should – we have been doing this throughout the previous section on double-entry accounting. Journals are simply debits and credits in chronological (date) order. The purpose of journals is to keep a day-to-day record of a business and its transactions.
Each transaction also requires a brief explanation of the transaction (below the debit and credit). This explanation should accurately describe what took place, so that anyone who glanced at it for the first time could easily identify what occurred. Each journal can also be matched to the relevant supporting document (such as a check stub or a receipt) by use of a cross-referencing code or folio number. This code or folio number simply cross-references between one document and another. If the first transaction above of $15,000 capital was made by issuing check number 38, then one could write ‘Ch-38’ (for example) under the folio number.
Using the folio number to match a journal entry to a source document would enable a person to easily trace the recorded transaction back to the source document and verify that the transaction actually took place (as evidenced by the source document). Journals may also often include a cross-referencing code or folio number to crossreference between the journal entries and the accounts (the next step). Each specific item, such as bank, would have its own folio number, and this would be used to cross-reference from the journal entry involving ‘bank’ to the banks’ account in the ledger (this will be covered in the next section). The folio numbers make it simple to trace information through the steps in the accounting cycle. These cross-referencing numbers or codes would work like this:
‘Sal-1’ is the individual code for the ‘salaries’ account. ‘J-1’ is the code for ‘journal page 1’. One could thus follow information from the journal entry to an account in the ledger, or from an account in the ledger back to the journal entries. There are actually various different types of journals, and in our next lesson we're going to see what they look like and how they work.
