1 Answer | Add Yours
The first step involves knowing which accounts are affected. Every transaction affects an account that is listed on the Chart of Accounts.
The amount of the transaction that gets posted will be the amount of the transaction. For instance, if you purchased $100 worth of paper, the transaction amount will be $100 to Office Supplies as a debit and $100 to cash as a credit.
Next, record the transaction in your General Journal. The General Journal is considered the “book of original entry” since every transaction is recorded in it. The transaction is the unit of organization. The Journal gives a chronological record of all business transactions throughout the life of the entity. Each transaction is a separate item, lowering your risks of making an error. Post the date, offsetting debits and credits and amount. Also include a transaction description, or explanation. The debits and credits must equal for balancing purposes.
If you have any reversing or adjusting entries, place those in the General Journal. This makes them easier to spot than if you put them into the General Ledger. Place any unusual entries into the General Journal. View the General Journal as containing information not found in the General Ledger, such as special recording entries.
The General Ledger consists of all financial transactions affecting a firm, only the method of organization is based on the account name. Information can get lost or improperly coded in General Ledgers. Each transaction will affect a particular account and a specified amount.
When preparing your Trial Balance, make a column that consists of the ending balance in all General Ledger accounts plus the figures from the special General Journal accounts. Start the balancing and adjusting process to arrive at your financial statements.
We’ve answered 319,865 questions. We can answer yours, too.Ask a question