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Bookkeeping Records

Bookkeeping Basics
General Ledger and Journals
Each account that we want to track and keep up with has a separate page or pages maintained in a record book called the General Ledger. The book is organized into major sections just like the Accounting Equation. Do you have any idea what these sections might be ? Come on this question is not that hard. The general ledger's major sections are Assets, Liabilities, Owner's Equity, Revenues, Expenses, and Draws.  

For each item (account) in our General Ledger, we record the increases and decreases for a period(usually a month) and calculate its ending balance. The ending balance of the account is easily determined by adding the increases and subtracting the decreases from the account's beginning period balance.

Ending Account Balance = Beginning Balance plus Increases minus Decreases.  

Simply stated a General Ledger is just a book containing the summarized financial transactions and balances of the accounts for all of a business's assets, liabilities, equity, revenue, and expense accounts.

Methods and symbols you might run across that indicate an account's balance is a debit or credit amount are - (1) Parentheses indicate a credit balance and no parentheses indicate a debit balance. (2) Brackets indicate a credit balance and no brackets indicate a debit balance. (3) Dr indicates a debit balance and Cr indicates a credit balance. (4) Plus Sign indicates a debit balance and Minus Sign indicates a credit balance. Note- The plus and minus are often used by accounting and bookkeeping software programs to indicate debits and credits. Don't get confused and think that the plus sign means an increase or that the minus sign means a decrease. They do not. In this case, they are simply symbols that mean either a debit or a credit.

It logically follows that since we only want summary amounts in our Ledger we need to record the detail entries some place else first. What record(s) do you use to do this ? Your right ! Journals are the preliminary records. All transactions are first entered in a preliminary record called a journal or book of original entry. This process is called journalizing. After your business transactions have been entered in your journals, they are then periodically (usually monthly) summarized and totaled and then transferred (posted) to the General Ledger as summary entries.  

Specialized Journals are journals used to initially record and group special types of transactions such as sales, cash disbursements, and cash receipts in their own journal. Some Special Journals a business will normally have are-Cash Receipts Journal, Cash Disbursements Journal (Check Register), Payroll Journal, Sales Journal, Purchase Journal, and the General Journal. All these journals are designed to record special types of business transactions and post the summarized debit and credit totals accumulated in these journals to the General Ledger periodically (usually once a month).

The General Journal is used to record unusual or infrequent types of transactions. Type of entries normally made in the general journal are depreciation entries, correcting entries, and adjusting and closing entries.
The Cash Payments Journal is a special journal that is used to record all cash that is paid out by a business except for payroll. Columns are set up for types of transactions that occur frequently enough to warrant a separate column. Some examples are Accounts Payable (Payments on Purchases and Services Charged) and Cash Purchases.
The Cash Receipts Journal is a special journal that is used to record all receipts of cash. Columns are set up that indicate the sources of the cash. Two of the major sources of cash for a business are Cash Sales and Collections of Customer Charge Sales. These and other categories that have a lot of activity (transactions) have their own column.
The Sales Journal is a special journal where sales of services and merchandise made on account (business's customer is allowed to charge purchases) are recorded.
The Purchases Journal is a special journal that is used to record all purchases and various expenses and other charges from suppliers that a business has an open account with (supplier allows the business to charge purchases).
The Payroll Journal is a special journal that is used to record and summarize salaries and wages paid to employees and the deductions for taxes and other authorized employee withholding amounts. This introductory tutorial does not cover the payroll accounting process and records.
The Sales Return & Allowances Journal is a special journal that is used to record the returns and allowances of merchandise sold on account.
The Purchase Returns & Allowances Journal is a special journal that is used to record the returns and allowances of merchandise purchased on account.




General Ledger and Journals Videos
Bookkeeping Records Quiz

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