Unit 2

The Basic Accounting Cycle

Chapter 3

Business Transactions and the Accounting Equation

Chapter 4

Transactions That Affect Assets, Liabilities, and Owners Capital

Chapter 5

Transactions That Affect Revenue, Expenses, and Withdrawals

Chapter 6

Recording Transactions in a General Journal

Chapter 7

Posting Journal Entries to General Ledger Accounts

Chapter 8

The Six-Column Work Sheet

Chapter 9

Financial Statements for a Sole Proprietorship

Chapter 10 Completing the Accounting Cycle for a Sole Proprietorship

Chapter 11 Cash Control and Banking Activities

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Chapter 6
Recording Transactions in a
General Journal
What Youll Learn
Explain the first three steps in the accounting cycle.
Give and describe several examples of source
documents.
Explain the purpose of journalizing.
Apply information from source documents.
Describe the steps to make a general journal entry.
Make general journal entries.
Correct errors in general journal entries.
Define the accounting terms introduced in this
chapter.

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Chapter 6, Section 1
The Accounting Cycle
What Do You Think?
What happens if you do not keep financial records in an
orderly fashion?

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SECTION 6.1

The Accounting Cycle

Main Idea
The accounting cycle is a series of steps done in each
accounting period to keep records in an orderly fashion.

You Will Learn

the steps in the accounting cycle.
the different types of accounting periods.

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The Accounting Cycle

SECTION 6.1

Key Terms

accounting cycle
source document
invoice
receipt
memorandum
check stub
journal
journalizing
fiscal year
calendar year

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SECTION 6.1

The Accounting Cycle

The Steps of the Accounting Cycle
The accounting cycle, the activities a business undertakes
to keep its accounting records in an orderly fashion, consists
of nine steps. This chapter will cover steps 1, 2, and 3:
Collect and verify source documents.
Analyze each transaction.
Journalize each transaction.

Glencoe Accounting Unit 2 Chapter 6 Copyright by The McGraw-Hill Companies, Inc. All rights reserved.

SECTION 6.1

The Accounting Cycle

The Steps of the Accounting Cycle

Glencoe Accounting Unit 2 Chapter 6 Copyright by The McGraw-Hill Companies, Inc. All rights reserved.

SECTION 6.1

The Accounting Cycle

The First Step in the Accounting Cycle:
Collecting and Verifying Source Documents
A business has several transactions that take place daily. A
source document is created for each business transaction.
Commonly used source documents are:
an invoice
a receipt
a memorandum
a check stub

Glencoe Accounting Unit 2 Chapter 6 Copyright by The McGraw-Hill Companies, Inc. All rights reserved.

SECTION 6.1

The Accounting Cycle

The Second Step in the Accounting Cycle:
Analyzing Business Transactions
Determine the debit and credit portions of each transaction
by analyzing the source document. In the real world, you
must examine this document to determine what happened in
a business transaction.

Glencoe Accounting Unit 2 Chapter 6 Copyright by The McGraw-Hill Companies, Inc. All rights reserved.

SECTION 6.1

The Accounting Cycle

The Third Step in the Accounting Cycle:
Recording Business Transactions in a Journal
Now the complete details of each transaction must be
entered in a journal, a record of the transactions of a
business. This is called journalizing.
A journal can also be called the book of original entry.

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10

SECTION 6.1

The Accounting Cycle

The Accounting Period
The accounting period is the length of time that
accounting records cover. A 12 month period is called a
fiscal year. If the fiscal year spans from January 1 to
December 31, it is a calendar year.

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11

SECTION 6.1

The Accounting Cycle

Key Terms Review
accounting cycle
Activities performed in an accounting period that
help the business keep its records in an orderly
fashion.
source document
A paper prepared as the evidence that a transaction
occurred.
invoice
A source document that lists the quantity,
description, unit price, and total cost of the items
sold and shipped to a buyer.

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12

SECTION 6.1

The Accounting Cycle

Key Terms Review
receipt
A source document that serves as a record of cash
received.
memorandum
A brief written message that describes a transaction
that takes place within a business.
check stub
A source document that lists the same information
that appears on a check and shows the balance in
the checking account before and after each check is
written.

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13

SECTION 6.1

The Accounting Cycle

Key Terms Review
journal
A chronological record of the transactions of a
business.
journalizing
The process of recording business transactions.
fiscal year
An accounting period of twelve months.
calendar year
Accounting period that begins on January 1 and
ends on December 31.

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14

Chapter 6, Section 2
Recording Transactions in the
General Journal
What Do You Think?
Why do you need to record transactions?

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15

SECTION 6.2

Recording Transactions in the

General Journal
Main Idea
You can use the general journal to record all of the
transactions of a business.

You Will Learn

how to record a general journal entry.
how to correct errors in the general journal.

Glencoe Accounting Unit 2 Chapter 6 Copyright by The McGraw-Hill Companies, Inc. All rights reserved.

16

SECTION 6.2

Recording Transactions in the

General Journal
Key Term
general journal

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17

SECTION 6.2

Recording Transactions in the

General Journal
Recording a General Journal Entry
The most common accounting journal is the general
journal, in which all of the transactions of a business
may be recorded. The general journal has two columns:
the left column for recording debits
the right column for recording credits

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18

SECTION 6.2

Recording Transactions in the

General Journal
Recording a General Journal Entry
This is an example of a general journal entry:

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19

SECTION 6.2

Recording Transactions in the

General Journal
Recording a General Journal Entry
There are seven steps to determining each journal entry:
Identify the accounts affected.
Classify the accounts affected.
Determine the amount of increase or decrease for
each account affected.
Determine which accounts are debited and for what
amount.
Determine which accounts are credited and for what
amount.
Determine the complete entry in T-account form.
Determine the complete entry in general journal entry
form.

Glencoe Accounting Unit 2 Chapter 6 Copyright by The McGraw-Hill Companies, Inc. All rights reserved.

20

SECTION 6.2

Recording Transactions in the

General Journal
Recording a General Journal Entry
Here is an example showing the analysis of a business
transaction and its general journal entry:

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21

SECTION 6.2

Recording Transactions in the

General Journal
Recording a General Journal Entry
Here is an example showing the analysis of a business
transaction and its general journal entry:

Glencoe Accounting Unit 2 Chapter 6 Copyright by The McGraw-Hill Companies, Inc. All rights reserved.

22

SECTION 6.2

Recording Transactions in the

General Journal
Recording a General Journal Entry
Here is an example showing the analysis of a business
transaction and its general journal entry:

Glencoe Accounting Unit 2 Chapter 6 Copyright by The McGraw-Hill Companies, Inc. All rights reserved.

23

SECTION 6.2

Recording Transactions in the

General Journal
Recording a General Journal Entry
Here is an example showing the analysis of a business
transaction and its general journal entry:

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24

SECTION 6.2

Recording Transactions in the

General Journal
Correcting the General Journal
If an error is found, it must be corrected.
Do not erase an error. Draw a line through it with a pen
and enter the correct information above the line.

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25

SECTION 6.2

Recording Transactions in the

General Journal
Key Term Review
general journal
An all-purpose journal in which all the
transactions of a business may be recorded.

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26

CHAPTER 6

Chapter 6 Review
Problem 1
Describe the general journal entry for the following event.
On January 16, 20-- On Time Delivery issued Check 243
to Comfort Space for $4,000 to buy office furniture.

(continued)
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27

CHAPTER 6

Chapter 6 Review
Answer 1
First record:
The date in the Date Column

20-Jan. 16

(continued)
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28

Answer 1
Then record:
The account debited in the Description column
The amount of the debit in the Debit column

20-Jan. 16 Office Furniture

4 0 0 0 00

(continued)
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29

CHAPTER 6

Chapter 6 Review
Answer 1
Then record:
The account credited in the Description column. The
account name is indented under the debit account name.
The amount of the credit in the Credit Column.

20-Jan. 16 Office Furniture

Cash in Bank

4 0 0 0 00
4 0 0 0 00

(continued)
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30

CHAPTER 6

Chapter 6 Review
Answer 1
Finally, in the Description column, record:
An explanation. Indent the explanation under the
credit account name.

20-Jan. 16 Office Furniture

Cash in Bank
Check 243

4 0 0 0 00

Glencoe Accounting Unit 2 Chapter 6 Copyright by The McGraw-Hill Companies, Inc. All rights reserved.

4 0 0 0 00

31

CHAPTER 6

Chapter 6 Review
Question 2
Why do businesses separate their accounting records
into accounting periods?

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32

CHAPTER 6

Chapter 6 Review

Answer 2
Businesses use accounting periods to make financial
comparisons possible. Comparisons of business
performance would be impossible if fiscal periods varied
in length.

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33

Resources

Glencoe Accounting Online Learning Center

English Glossary
Spanish Glossary

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