The Journal & Preparing Journal Entries Homework Help

The Journal

Everyone is intimidated by new concepts, ideas and terminology (like debits, journals, credits, etc.). But, learning can be made quite easy by relating new concepts to pre existing concept that are already well understood. So, think: what do you understand about a journal (not an accounting journal, just any genuine journal)? It's just a log book, right? It is place where you can record a history of transactions and events - generally in date (chronological) order.

Similarly, an accounting journal is just a simple log book that comprises a chronological listing of a company's transactions. Hear rather than including a complete narrative description of a company's transactions the journal lists the items by a "form of shorthand notation." Specially, the condition signifies the accounts involved, and whether each is debited or credited. Keep in mind what was said at the starting of the chapter: "The system should be sufficient to fuel the preparation of the financial statements, and be skilled of maintaining retrievable certification for every transaction. In other words, some transaction logging procedure must be in place." This journal satisfies the constraint for this logging process!

The common journal is number of times called the book of original entry. This means that the source documents are reviewed and interpreted as to the related accounts. Then, they are documented in the journal via their own debit/credit format. As such the general journal becomes a log volume of the recordable transactions. The journal is not enough, by itself, to prepare financial statements. That purpose is fulfilled by subsequent steps. But, maintaining the journal is the point of starting toward that end objective.

1. Illustrating the Accounting Journal

The given illustration draws upon the facts and figures for the Xao Corporation. Particularly it shows the journalizing method for Xao's transactions. You should review it cautiously, specifically noting that it is in chronological order with each transaction of the business being decreased to the short-hand explanation of its debit/credit effects. You will also note that each and every transaction is followed by a brief narrative explanation; this is a good practice to give the further documentation. For each and every transaction, it is customary to list "debits" first (flush left), then the credits (indented right). Finally, notice that a transaction may involve more than the two accounts (as in the January 28 transaction below); the consequent journal entry for the complex transactions is known as a "compound" entry.

As you reconsider the general journal for Xao, note that it is only two pages long. An definite journal for a business may consume hundreds and thousands of pages to document its many transactions. As a result, some businesses might maintain the journal in electronic form only.

2. Special Journals

First, the explained journal was referred to as a "general" journal. All the transactions and events can be kept in the general journal. In this a business might sometimes use "special journals." Special journals are entirely optional; they are typically employed when there are many superfluous transactions. Thus, a company could have particular journals for each of the following: cash receipts, cash payments, purchases, sales, and/or payroll. These special journals do not take place the general journal. Instead of that they just strip out recurring type transactions and place them in their own distinct journal. The transaction descriptions connected with each transaction found in the general journal are not generally needed in a special journal, given that each transaction is redundant in nature. In the absence of the special journals, you can well imagine how voluminous a general journal could become. But, for learning and understanding purposes, let's just rely on the general journal to complete our goals.

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3. Page Numbering

Second, notice that the illustrated journal comprises of two pages ( labeled page 1 and page 2). Although the journal is sequential, it is supportive to have the page number indexing for transaction cross referencing and working to the rear from financial statement amounts to individual transactions.

4. But, What are the basic Account Balances?

The general journal is a big device to capture transaction and the event details, but it definitely does nothing to tell a company about the balance in each definite account. For instance, how much currency does Xao Corporation have at the end of the month January? One can go through the journal and net debits /credits to Cash ($25,000 - $2,000 + $4,000 - $500 + $4,800 - $5,000 = $26,300). But, this is boring and highly prone to error. It would become almost impossible if the journal were hundreds of pages long. A better and advanced way is needed. This is where the general ledger comes into the action.

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