CHAPTER 4= The general Journal and the General Ledger

Why is the journal referred to as the "record of original entry"?

It is the first accounting record where transactions are entered.

Why is the ledger called the "record of finale entry"?

It is the last accounting record in which a transaction is recorded.

Journal (90)

The record of original entry

Posting (99)

Transferring data from a journal to a ledger

Why are posting reference made in ledger accounts and in the journal?

they indicate that the entry has been posted and ensure against posting the same entry twice.

Why are check and invoice numbers included in the journal entry description?

to provide a audit trail to trace information trough the accounting system

Correcting entry (103)

A journal entry made to correct an erroneous entry

Compound entry (96)

A journal entry with more than one debit or credit

Balance ledger form (99)

A ledger account form that shows the balance of the account after each entry is posted

General ledger (99)

A permanent, classified record of all accounts used in a firm's operation; a record of final entry

Accounting cycle (90)

A series of steps performed during each accounting period to classify, record, and summarize data for the business and to produce needed financial information

The general ledger organizes accounting information in:

Account order.

Are the following statements true or false? Why? a. 'If a journal entry that contains an errors have been posted, erase the entry and change the posting in the ledger accounts". b. "Once an incorrect journal entry has been posted, the incorrect amounts remain in the general ledger account".

Both statements are FALSE. If an incorrect journal entry was posted, a correct entry should be journalized and posted. To ensure honesty and provide a clear audit trail, erasures are not permitted in the journal.

The general journal organizes accounting information in:

Date order.

The part of the journal entry to be recorder first is the:

Debit

A general journal is like a (n)

Diary

Give examples of items that might appear in an audit trail:

1. Check number 2. Invoice number for good purchased on credit from a vendor 3. Invoice number for service billed to a charge account customer. 4. Memorandum number.

Audit trail (91)

A change of reference that makes it possible to trace information, locate errors, and prevent fraud

General journal (90)

A financial record for entering all types of business transactions; a record of original entry

How do you correct an incorrect journal entry that has not been posted?

Neatly cross out the incorrect item and write the correct data above it.

In a compound journal entry, if two accounts are debited, must two accounts are credited?

No. The only requirement is that the total debits must equal the total credits.

Chronological order (90)

Organized in the order in which the events occur

The accountant for Elegant lawn care never includes description when making journal entries. What effect will this have on the accounting system?

The audit trial will be very difficult to follow.

What is recorded in the Posting Reference column of a general journal?

The general ledger account number

What is entered in the Posting Reference column of the general journal?

The ledger account number.

Which of the following shows both the debits and credits of the entire transaction? a. A entry in the general journal b. A posting to a general ledger account

a. An entry in the general journal.

Draw (or name) a diagram of the first three steps of the accounting cycle:

step 1. Analyze transactions step 2. Journalize transactions step 3. Post transactions