basics-of-accounting-information-processing

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Unformatted text preview: rd that end objective. 7.1 Illustrating the Accounting Journal The following illustration draws upon the facts for the Xao Corporation. Specifically it shows the journalizing process for Xao’s transactions. You should review it carefully, specifically noting that it is in chronological order with each transaction of the business being reduced to the short-hand description of its debit/credit effects. You will also note that each transaction is followed by a brief narrative description; this is a good practice to provide further documentation. For each transaction, it is customary to list “debits” first (flush left), then the credits (indented right). Finally, notice that a transaction may involve more than two accounts (as in the January 28 transaction below); the corresponding journal entry for these complex transactions is called a “compound” entry. As you review the general journal for Xao, note that it is only two pages long. An actual journal for a business might consume hundreds and thousands of pages to document its many transactions. As a result, some businesses may maintain the journal in electronic form only. 7.2 Special Journals First, the illustrated journal was referred to as a “general” journal. All transactions and events can be recorded in the general journal. However, a business may sometimes use “special journals.” Special journals are totally optional; they are typically employed when there are many redundant transactions. Thus, a company could have special journals for each of the following: cash receipts, cash payments, sales, purchases, and/or payroll. These special journals do not replace the general journal. Instead, they just strip out recurring type transactions and place them in their own separate journal. The transaction descriptions associated with each transaction found in the general journal are not normally needed in a special journal, given that each transaction is redundant in nature. Without special journals, you can well imagine how voluminous a general journal could become. But, for learning purposes, let’s just rely on the general journal to accomplish our goals. Download free eBooks at bookboon.com 34 Basics of Accounting & Information Processing The Journal GENERAL JOURNAL Date 1-1-X3 Page 1 Accounts Debits Cash Credits 25,000 Capital Stock 25,000 Issued stock to shareholders, in exchange for cash 1-4-X3 Advertising Expense 2,000 2,000 Cash Paid advertising expense for initial advertising programs 1-8-X3 Cash 4,000 Service Revenue 4,000 Provided services to customers for cash GENERAL JOURNAL Date 1-15-X3 Page 2 Accounts Debits Utilities Expense Credits 1,000 Accounts Payable 1,000 Received bill for utility costs incurred 1-17-X3 Accounts Receivable 8,000 8,000 Service Revenue Provided services to customers on account 1-18-X3 Accounts Payable 500 Cash 500 Paid half of the amount due on the utility bill received on January 15 1-25-X3 Cash 4,800 Accounts Receivable 4,800 Received 60% of the amount due...
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This document was uploaded on 09/24/2013.

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