Chapter 4
The Accounting Cycle: Journals and Ledgers
85
JournAl
Page 1
1
Date Account Titles and Explanation
2
PR
3
Debit
Credit
2016
Jan 2 Cash
2a
1,500
Service revenue
2b
1,500
Completed work for client
2c
5
4
________________
FIgure 4.6
1
Date
The date column includes the current year at the top of the column, followed by the month
and day of the transaction.The journal entries are entered in chronological order.
2
Account Titles and Explanation
This column indicates the names of the accounts being affected.The logic you have been using
to indicate the accounts to be used has not changed. For example, if revenue is being earned
and cash is received, cash will increase (debit) and service revenue will increase (credit). The
journal merely places this information in a standard order to keep information organized.
2a
Any accounts that will be debited in the transaction will be listed first.
2b
Any accounts that will be credited in the transaction will be listed after the debited
accounts and indented slightly. This is a formatting standard which makes it easier to
read long lists of transactions.
2c
A brief explanation will be listed immediately after the transaction.
If you are given a list of accounts to choose from, use accounts from that list. If you are not
provided with a list, use an appropriate name that accurately describes what the account
is tracking. For example, repairs performed in the office may be called Repairs Expense,
Maintenance Expense or Repairs & Maintenance Expense. However once an account name
has been used, the same name should be used for all similar transactions.
3
PR (Posting Reference)
The posting reference column is initially left blank when the journal entry is prepared. We
will use this column when we start the third step of the accounting cycle, posting to the ledger
accounts.
4
Debit or Credit
These two columns are used to record the amount of the transaction in the appropriate side—
debit or credit.
5
Leave a space between journal entries to make it easier to read and separate them.
