Okay, we're going to continue on kind of where we left off in the last chapter.
When we first started out, we learned how to record business transactions using our accounting equation.
Remember the accounting equation says that, our assets
our liabilities plus owner's equity.
When we were introduced to this is our first chapter,
we recorded transactions using that.
If we had our cash account, our cash would go up 100, and
our Owner's Equity or capital account would go up by 100
dollars as well. We learned how to record transactions using the accounting equation
in our first chapter. Our second chapter then said, " well let's not use the accounting equation anymore. Let's go ahead and use T accounts."
And so what we were doing is drawing a T account under each of our asset accounts,
for example, our cash account had a T account and our supplies account
had a T account, our accounts payable
account had a T account.
All of our Owner's Equity accounts, including the owner's capital account, had a T account.
Our withdrawals account had a T account, etc.
Well, we are going to continue to think of accounts
just as we do here, but we're not going to record transactions
originally into T accounts. Instead what we're going to do is
we're going to record transactions in a journal. And let me tell you why, or
let me show you why. Let's say that our supplies went up 100 dollars,
and we're looking at this account and we're saying, "oh wow,
well supplies went up 100 dollars,"
Well, I can see that I debited supplies for 100, but what did I credit?
I can't see what I credited. Well we can make a kind of a random guess.
We can say, "Well, we might have paid out cash". So we
might of, the other account affected might have been
the cash account. But I'm not really sure because
another option would've been... can you figure it out?
We might have purchased the supplies on account. So, again
we're king of guessing if we're only looking at the one account.
We have to kind of guess what was the other account affected.
So instead of recording transactions right away into T accounts,
or our general ledger accounts, what we're going to do is we're going to journalize
the account. So, we're going to start learning how
to journalize. And we journalize
in a general journal.
So I'm going to show you
pretty quickly how to journalize in our General journal.
I'm going to erase this.
I'm going to draw a journal page for you on the board, and demonstrate to you
how to record a transaction in our General journal.
Well, our General journal always has a date column,
it always has an accounts and
Hopefully I'm drawing this kind of straight.
It has a debit column, and it has a credit column.
This is our heading,
at the very top of each journal page, and of course it will have journal
page one, journal page two, etc.
This is just like a journal. It's what we use like when we were in school
and recorded our daily activities. You k now I sat next to
Joey Johnson on the bus and he's so cute.
We had macaroni and cheese for lunch today and it was disgusting.
You know something like that. We're just keeping a recording, in
chronological order all the transactions that happened in the business.
This is our General journal.
This is going to be page 1.
Let's look at our first transaction. Let's say that
the owner invested some money in the business.
Well, the first thing we always want to do, is we want to put down the dates.
Let's say it was Jan. 1
and let's say that we need to look at the account that was
debited first. If the owner invested money in the business,
we know that cash is going up,
and we know that the owner's capital is going up as well.
We're going to put down Jan. 1. We want to
put the debited account first. The debited account is
cash. We're going to list cash out. We're going to put it flush
against this date line. We're going to indent and put the amount. Let's say it was $1,000.
We're listing cash first because it's the debited account.
We're going to go ahead and put the debited amount in the debit column.
The other account that was affected was the owner's capital. This one was also increased
and we're going to increase the owner's capital with a credit. We're going to ident
about a quarter to a half an inch. Indenting means to move over. You don't need to actually draw the arrow, but
we're indenting. We're going to put down the owner's capital account.
Whatever the owner's name is, we'll just call it Owner.
Writing out the full name of the account,
trying not to abbreviate, because when you start abbreviating then when
people want to go back and look at the journal, you might have abbreviated it so much
they don't understand what
the account was. Please don't abbreviate. Then we're going to put the dollar amount here.
We can see both the debit and the credit, the two accounts
affected. Then we show a little explanation. I like to indent just a little bit.
You can put it in parenthesis if you want your explanation, owner invests in
Now for the explanation, you can definetely abbreviate.
You always want to skip one single blank line.
You want to have a blank line before you start your next journal entry.
I'm going to erase this one. Let's do one more. Let's say that
the business purchases
supplies on account.
I know supplies is going up,
and I know my accounts payable is also going up.
I've skipped a line.
You don't have to write it in, I'm just showing you. Skip a line.
Then, we move to the next one. This happened on Jan. 2.
I'm going to put my date, which is Jan. 2.
My supplies is going up, supplies is an asset.To increase an asset,
you debit it. We always list debits first.
We're going to write down the supplies. Let's say we bought
$300 of supplies. Supplies is
being debited. List it first.
Put the dollar amount under the debit column.
Accounts payable is the account being credited.
I know to increase accounts payable, I need to credit the account,
so I'm going to list that next. I'm going to indent
a little bit, and this is my accounts payable account.
Again, I try not to abbreviate,
because I don't want to make anybody else confused as to what account I'm using.
I'm crediting accounts payable for 300.
I'm going to go ahead and put a little explanation, purchased supplies.
I'm going to abbreviate in my explanation.
I can put down who I bought it from. Maybe I bought it at
Wal Mart or whatever.
This is how you journalize and I hope that was explained pretty well. Good job!