UNDERSTANDING JOURNAL ENTRIES

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Appendix V

UNDERSTANDING JOURNAL ENTRIES

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Understand the Direction

Do not be in a hurry to record Journal Entries. Read the directions carefully. Be sure to underline the important dates, amounts, and problem requirements.

Understand the Business Activity

Accounting transactions describe a business activity. To record this activity you must understand it thoroughly. State the given data and do the math calculations using the special General Journal on page A36. If an earlier Journal Entry is involved, make it part of your analysis.

Recording Steps

A. Record the finances (cash, receivable, or payable)

B. Record why the financing was necessary (assets purchased, revenue earned, expenses incurred)

C. Make sure debits equal credits.

Summary

Read the directions carefully. Underline the important dates, amounts, and problem requirements. Mentally summarize the transaction. Record the finances. Record why the financing was necessary. Make sure debits equal credits.

Helpful Hints

Try to arrange data in an organized fashion.

Often it is helpful to summarize data using T accounts arranged according to the balance sheet equation.

Show formulas and mathematical steps used to arrive at a solution.

If you do not understand some part of a problem reference Quick Notes or a text for additional information.

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