Financial Accounting Notes


What is Journal

The journal is a chronological (day-by-day) record of transactions. The information recorded about each transaction includes the date of the transaction, the debit and credit changes in specific ledger accounts, and a brief explanation of the transaction.

Why Use a Journal?

  1. The journal shows all information about a transaction in one place and also provides an explanation of the transaction.
  2. The journal provides a chronological record of all the events in the life of a business.
  3. The use of a journal helps to prevent errors.

 

Transactions (To illustrate the use of journal):

Mar       1:       James Roberts began the business by depositing $180,000 in a company bank account.

Mar     2:        Purchased land for $141,000 cash.

Mar      5:        Purchased a prefabricated building for $36,000, paying $15,000 cash and incurring a liability of $21,000.

Mar     10:       Sold a part of land at a price equal to cost of $11,000, collectible within three months.

Mar     14:       Purchased office equipment on credit for $5,400.

Mar     20:       Received $1,500 cash as partial collection of the 11,000 account receivable.

Mar     30:       Paid $3,000 on account payable.

 

The account titles used by the Robert Real Estate Company:

                        Cash                                      James Robert, Capital
                        Accounts Receivable        Account Payable
                        Land                                       Building
                        Office Equipment   

 
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