One of the most important steps in the accounting process is Journalizing. The Journal is where every transaction should originally be recorded. Since ledger entries may go to multiple accounts on various pages or in various files, the journal is essential because it is the one book with nearly every entry in chronological order.
Each entry in the journal will have a date, the list of associated accounts with that entry, and a debit that equals a credit. Here is one such example:
Jan. 4 Inventory 350 Debit
Accounts Payable 350 Credit
(Purchased Widgets on account,
payable in 10 days)
Hopefully the html code and formatting looks okay. You should see a Debit in the left column and a credit in the right column. As you can see, there was inventory purchased on credit. There is an increase in an asset and in a liability account, so as to maintain the accounting equation. Also, the debit equals the credit.
This is just a simple example, but it could be extended to more complex situations. The idea here is that all transactions need to be recorded in the journal first, before the ledger. For more examples, take a look at this webpage over at NetMBA. Click HERE.
The next step in the accounting cycle is the Posting process, and we will talk about that next time. Thanks for visiting.
----Sincerely, Trevor Stasik.
To return to initial post in my Accounting Review Guide, click HERE.
Journalizing, Accounting, Accounts, Cycle