Chapter 4

The General
Journal and the
General Ledger

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 Chapter 4 Learning Objectives

SECTION 1: The General Journal

4-1 Record transactions in the general journal.
4-2 Prepare compound journal entries.

SECTION 2: The General Ledger

4-3 Post journal entries to general ledger accounts.
4-4 Correct errors made in the journal or ledger.
4-5 Define the accounting terms new to this chapter.

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 The Accounting Cycle
Step 2 Step 3
Journalize
Journalize
the Post
Step 1 transactions
data about transactions Step 4
Analyze
Analyzeand transactions to the ledger Prepare
transactions
classify a worksheet
transactions

Step 5
Prepare
financial
statements

Step 9 Step 6
Evaluate and Journalize
communicate Step 7 adjusting
financial Step 8 Journalize entries
information Prepare a closing
postclosing entries
trial balance

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 Section 1: The General Journal

Learning Objective

4-1: Record transactions in the

general journal.

.
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Section 1, Objective 4-1: Record transactions in the general journal.

Journal

● A journal is a diary of business activities.

● There are different types of accounting

journals.

● Transactions are entered in the journal in

chronological order.

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Section 1, Objective 4-1: Record transactions in the general journal.

Recording a
Business Transaction
1. Analyze the financial event.
● Identify the accounts affected.
● Classify the accounts affected.
● Determine the amount of increase or decrease for each account
affected.
2. Apply the rules of debit and credit.
● Which account is debited? For what amount?
● Which account is credited? For what amount?

3. Make the entry in T-account form.

4. Record the complete entry in general journal form.
Let’s look at one
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 Section 1, Objective 4-1: Record transactions in the general journal.

Transaction: On November 6, Trayton Eli withdrew $100,000 from personal

savings and deposited it in a new business checking account for Eli’s
Consulting Services.
GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
20X1

Nov. 6 Cash 100,000.00

Trayton Eli, Capital 100,000.00

Enter the account to be debited.

Enter the amount on the same line in the Debit column.
Enter the account to be credited.
Enter the amount on the same line in the Credit column.

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Section 1, Objective 4-1: Record transactions in the general journal.

Transaction: On November 6, Trayton Eli withdrew $100,000 from personal

savings and deposited it in a new business checking account for Eli’s
Consulting Services.
GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
20X1

Nov. 6 Cash 100,000.00

Trayton Eli, Capital 100,000.00
Investment by owner, Memo 01

Then enter a complete but concise description of the transaction.

Whenever possible, the journal entry should refer to the source of the
information.
Document numbers are part of the audit trail.

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Section 1, Objective 4-1: Record transactions in the general journal.

Cash Purchase of Equipment

On November 7, Eli’s Consulting Services issued
Check 1001 for $5,000 to purchase a computer and
other equipment.

GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

Nov. 7 Equipment 5,000.00

Cash 5,000.00
Purchased equip., Check 1001

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Section 1, Objective 4-1: Record transactions in the general journal.

Purchase of Equipment on Credit

On November 10, Eli’s Consulting Services purchased
office equipment on account for $6,000.

GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

Nov. 10 Equipment 6,000.00

Accounts Payable 6,000.00
Purchased equipment on
account from Office Plus,
Inv. 2223, due in 60 days

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Section 1, Objective 4-1: Record transactions in the general journal.

Cash Purchase of Supplies

On November 28, Eli’s Consulting Services
purchased supplies for $1,500, Check 1002.

GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

Nov. 28 Supplies 1,500.00

Cash 1,500.00
Purchased supplies, Ck. 1002

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Section 1, Objective 4-1: Record transactions in the general journal.

Payment to a Creditor
On November 30, Eli’s Consulting Services paid Office
Plus $2,500 in partial payment of Invoice 2223, Check
1003. Remember, in the general journal,
always enter debits before credits!
GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

Nov. 30 Accounts Payable 2,500.00

Cash 2,500.00
Paid on account, Office Plus,
Invoice 2223, Check 1003

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Section 1, Objective 4-1: Record transactions in the general journal.

Recording a prepayment of rent

On November 30, Eli’s Consulting Services wrote
Check 1004 for $8,000 to prepay rent for December
and January.

GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT

REF.

Nov. 30 Prepaid Rent 8,000.00

Cash 8,000.00
Paid Dec. and Jan. rent
in advance; Check 1004

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Section 1, Objective 4-1: Record transactions in the general journal.

Services performed for cash

Eli’s Consulting performed services for $36,000 in
cash.

GENERAL JOURNAL PAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
20X1

Dec. 31 Cash 36,000.00

Fees Income 36,000.00
Performed services for cash

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Section 1, Objective 4-1: Record transactions in the general journal.

Performed services on account

Eli’s Consulting performed services on account for
$11,000.

GENERAL JOURNAL PAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
Dec. Accounts Receivable 11,000.00
31
Fees Income 11,000.00
Performed services on credit

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Section 1, Objective 4-1: Record transactions in the general journal.

Received Cash From Credit Clients

Received $6,000 in cash from a credit client on

account.

GENERAL JOURNAL PAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
Dec. 31 Cash 6,000.00
Accounts Receivable 6,000.00
Received cash from credit
clients on account

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Section 1, Objective 4-1: Record transactions in the general journal.

Paid Salaries

Paid $8,000 for salaries.

GENERAL JOURNAL PAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
Dec. Salaries Expense 8,000.00
31
Cash 8,000.00
Paid monthly salaries to
employees, Checks 1005-1006

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Section 1, Objective 4-1: Record transactions in the general journal.

Paid Utility Bill

Eli’s Consulting paid $650 in cash for a utility bill.

GENERAL JOURNAL PAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
Dec. Utilities Expense 650.00
31 Cash 650.00
Paid monthly bill for utilities,
Check 1007

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Section 1, Objective 4-1: Record transactions in the general journal.

Owner’s Withdrawal

The owner, Trayton Eli, withdrew $5,000 from the

company.

GENERAL JOURNAL PAGE 2

DATE DESCRIPTION POST. DEBIT CREDIT

REF.
Dec. Trayton Eli, Drawing 5,000.00
31
Cash 5,000.00
Owner withdrew cash for
personal expenses,
Check 1008

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 Section 1: The General Journal

Learning Objective

4-2: Prepare Compound Journal

Entries.

.
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Section 1, Objective 4-2: Prepare compound journal entries.

Preparing Compound Entries

Some transactions require a compound entry—a journal
entry that contains more than one debit or credit.
BUSINESS TRANSACTION: On November 7, the firm purchased
equipment for $5,000, issued Check 1001 for $2,500, and agreed to
pay the balance in 30 days.
Remember: No matter
how many accounts are
GENERAL JOURNAL affected PAGE
by a transaction,
2
total debits must equal
DATE DESCRIPTION POST. DEBIT total credits.
CREDIT
REF.
Nov. 7 Equipment 5,000.00

Accounts Payable 2,500.00

Purchased equipment for cash and
balance owed in 30 days, Check
1001

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 Ledgers

● The ledger contains a separate form for

each account.

● The third step of the accounting cycle is

posting to the ledger.

● The process of transferring data from the

journal to the ledger is known as posting.

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 Posting
QUESTION
:
What is posting?

ANSWER:

Posting is the process of

transferring data from a journal to a
ledger.

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 The Accounting Cycle
Step 2 Step 3
Journalize
Journalize
the Post
Step 1 transactions
data about transactions Step 4
Analyze
Analyzeand transactions to the ledger Prepare
transactions
classify a worksheet
transactions

Step 5
Prepare
financial
statements

Step 9 Step 6
Evaluate and Journalize
communicate Step 7 adjusting
financial Step 8 Journalize entries
information Prepare a closing
postclosing entries
trial balance

.
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 Ledger Account Forms
On the ledger account form shown below, notice the:

● Account name and number

● Columns for date, description, and posting reference
● Columns for debit, credit, debit balance, and credit
balance

ACCOUNT CASH ACCOUNT NO. 101

POST. BALANCE
DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT
20X1
Nov. 6 J1 100,000.00 100,000.00

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 Section 2: The General Ledger

Learning Objective

4-3: Post journal entries to

general ledger accounts.

.
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 Section 2, Objective 4-3: Post journal entries to general ledger accounts.
.

Five Steps for Posting

1. On the ledger form, enter the date of the transaction. Enter

a description of the entry, if necessary. Usually, routine
entries do not require descriptions.
2. On the ledger form, enter the general journal page in the
Posting Reference column.
3. On the ledger form, enter the debit amount in the Debit
column or the credit amount in the Credit column.
4. On the ledger form, compute the balance and enter it in the
Debit Balance column or the Credit Balance column.
5. On the general journal, enter the ledger account number in
the Posting Reference column.

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Section 2, Objective 4-3: Post journal entries to general ledger accounts.
.

Step 1: On the ledger form, enter the date of the transaction. Enter a
description of the entry, if necessary. Usually, routine entries do not
require descriptions.

GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT
REF.

20X1
Nov. 7 Equipment 5,000.00
Cash 5,000.00
Purchased equipment
Check 1001

ACCOUNT Equipment ACCOUNT NO. 141

POST. BALANCE
DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT
20X1
Nov. 7

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Section 2, Objective 4-3: Post journal entries to general ledger accounts
.

Step 2: On the ledger form, enter the general journal page in the Posting
Reference column. The letter J refers to the general journal.

GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT
REF.

20X1
Nov. 7 Equipment 5,000.00
Cash 5,000.00
Purchased equipment
Check 1001

ACCOUNT Equipment ACCOUNT NO. 141

POST. BALANCE
DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT
20X1
Nov. 7 J1

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Section 2, Objective 4-3: Post journal entries to general ledger accounts.
.

Step 3: On the ledger form, enter the debit amount in the Debit column or the
credit amount in the Credit column.

GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT
REF.

20X1
Nov. 7 Equipment 5,000.00
Cash 5,000.00
Purchased equipment
Check 1001

ACCOUNT Equipment ACCOUNT NO. 141

POST. BALANCE
DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT

20X1
Nov. 7 J1 5,000.00

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Section 2, Objective 4-3: Post journal entries to general ledger accounts.
.

Step 4: On the ledger form, compute the balance and enter it in the Debit
Balance column or the Credit Balance column.

GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT
REF.

20X1
Nov. 7 Equipment 5,000.00
Cash 5,000.00
Purchased equipment
Check 1001

ACCOUNT Equipment ACCOUNT NO. 141

POST. BALANCE
DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT

20X1
Nov. 7 J1 5,000.00 5,000.00

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Section 2, Objective 4-3: Post journal entries to general ledger accounts.
.

Step 5: On the general journal, enter the ledger account number in the
Posting Reference column.

GENERAL JOURNAL PAGE 1

DATE DESCRIPTION POST. DEBIT CREDIT
REF.

20X1
Nov. 7 Equipment 141 5,000.00
Cash 5,000.00
Purchased equipment
Check 1001

ACCOUNT Equipment ACCOUNT NO. 141

POST. BALANCE
DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT

20X1
Nov. 7 J1 5,000.00 5,000.00

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Section 2, Objective 4-3: Post journal entries to general ledger accounts.
.

General Ledger Accounts

In the general ledger accounts, the balance sheet
accounts appear first and are followed by the
income statement accounts. The order is:
● Assets
● Liabilities
● Owner’s equity
● Revenue
● Expenses

This order of accounts speeds the preparation of the trial

balance and the financial statements.

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 Section 2: The General Ledger

Learning Objective

4-4: Correct errors made in the

journal or ledger.

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Section 2, Objective 4-4: Correct errors made in the journal or ledger.

Journal and Ledger Errors

Sometimes errors are made when recording

transactions in the journal.
A correcting entry is recorded to adjust the accounting
records and resolve the error.

Do not erase or change the journal entry or the

postings in the ledger accounts, as erasures are never
permitted in the journal or ledger.

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Section 2, Objective 4-4: Correct errors made in the journal or ledger.

Recording a Correcting Entry

On September 1 an automobile repair shop
debited Office Equipment rather than Shop
Equipment for $18,000 by mistake.
The debit was posted to the Office Equipment
account in the general ledger.
A correcting journal entry must be journalized
and posted.

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Section 2, Objective 4-4: Correct errors made in the journal or ledger.

Recording a Correcting Entry

GENERAL JOURNAL PAGE 1
DATE DESCRIPTION POST. DEBIT CREDIT
REF.

20X1
Sept. 1 Office Equipment 141 18,000.00
Cash 101 18,000.00
Purchased equipment
Check 1104

This erroneous journal entry was posted to the general

ledger.

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Section 2, Objective 4-4: Correct errors made in the journal or ledger.

Recording a Correcting Entry

GENERAL JOURNAL PAGE 1
DATE DESCRIPTION POST. DEBIT CREDIT
REF.

20X1
Oct. 1 Shop Equipment 151 18,000.00
Office Equipment 141 18,000.00
To correct error made on
Sept. 1 when a purchase
of shop equipment was
recorded as office
equipment

● The correcting journal entry debits Shop

Equipment and credits Office Equipment for $18,000.
● The entry transfers $18,000 out of the Office
Equipment and into the Shop Equipment account.

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 Thank You
for using

College Accounting, 16th

Edition

Price • Haddock •
Farina

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