Chapter 4: General Journal

For any business, their main form of recording transactions is by entering Journal Entries into the General Ledger. Journal Entries are transactions recorded chronologically, and each shows an explanation of each transaction, the accounts affected, whether those accounts are increased or decreased, and by what amount. Journal Entry transactions are still recorded using the double-entry accounting method with debits and credits. The original rules of debit and credit still apply, with a new one added:

• • For each Debit(DR) there is an equal Credit(CR)

  • Debits are on the Left and Credits are on the Right

  • Debits are always recorded FIRST

As stated above, when formatting a journal entry you will still record the date of the transaction, list the account name, as well as the dollar amount of the transaction. However, now you will include an additional identifier for each account, known as an Account Number. For a business, they list out all of their accounts used for their general ledger in a Chart of Accounts. Accounts are listed in the chart of accounts in the following sequence:

• • 101 - 199 : Assets

  • 201 - 299 : Liabilities

  • 301 - 399 : Owner's Capital/Withdrawals

  • 401 - 499 : Revenue Accounts

  • 501 - 599 : Expense Accounts

For example, below you will see the chart of accounts for Backyard BBQ: