Overview

• What you’ll learn: How to analyze transactions and record them as journal entries in the general journal, including simple and compound entries, proper formatting, and source document identification.
• Prerequisites: Module 1 — Accounting Foundations (especially Lesson 3: Double-Entry Bookkeeping)
• Estimated reading time: 18 minutes

Introduction

The Grand Historian records: The journal is the book of original entry — the first place where every economic event is inscribed into the permanent record of the enterprise. If the chart of accounts is the census register, the journal is the daily chronicle — a meticulous diary of every coin received, every debt incurred, every asset acquired. It is here that the accountant, like the court scribe of old, transforms the chaos of commerce into the ordered prose of double-entry bookkeeping.

To record a journal entry is to make a statement of fact: this happened, these accounts were affected, and these are the amounts. There is no room for ambiguity, no tolerance for approximation. The journal entry is the atom of accounting — the smallest indivisible unit of financial truth.

The General Journal

The general journal is a chronological record of all transactions. Each entry contains:

Formatting Conventions

• Debit accounts are listed first, flush with the left margin.
• Credit accounts are listed second, indented to the right.
• Debit amounts appear in the debit column; credit amounts in the credit column.
• A brief explanation follows each entry.
• A blank line separates entries.

Analyzing Transactions: The Four-Step Process

Before writing any journal entry, follow these steps:

1. Identify the accounts affected: What accounts change as a result of this transaction?
2. Classify each account: Is it an asset, liability, equity, revenue, or expense?
3. Determine increase or decrease: Does each account increase or decrease?
4. Apply debit/credit rules: Based on the account type and direction, determine whether to debit or credit.

Common Journal Entries

1. Owner Invests Cash

  Date    Account                     Debit      Credit
  ─────   ─────────────────────────   ────────   ────────
  Jan 1   Cash                        50,000
              Owner's Capital                     50,000
          (Owner's initial investment)

Analysis: Cash (asset) increases — debit. Owner’s Capital (equity) increases — credit.

2. Purchase Equipment on Credit

  Jan 3   Equipment                   12,000
              Accounts Payable                    12,000
          (Purchased equipment on account)

Analysis: Equipment (asset) increases — debit. Accounts Payable (liability) increases — credit.

3. Provide Services for Cash

  Jan 10  Cash                         3,500
              Service Revenue                      3,500
          (Performed consulting services)

4. Pay Monthly Rent

  Jan 15  Rent Expense                 2,000
              Cash                                 2,000
          (Paid January rent)

5. Provide Services on Account

  Jan 18  Accounts Receivable          4,200
              Service Revenue                      4,200
          (Performed services on account)

6. Receive Payment on Account

  Jan 25  Cash                         4,200
              Accounts Receivable                  4,200
          (Collected receivable from Jan 18)

Note: This is not revenue. The revenue was already recognized on Jan 18. This entry merely converts one asset (receivable) to another (cash).

Compound Journal Entries

A compound entry involves more than two accounts. The golden rule remains: total debits must equal total credits.

  Jan 20  Equipment                   15,000
              Cash                                 5,000
              Notes Payable                       10,000
          (Purchased equipment: $5,000 cash, $10,000 note)

One debit, two credits — but the totals balance: $15,000 = $5,000 + $10,000.

Source Documents

Every journal entry should be supported by a source document — objective evidence that the transaction occurred:

• Sales invoice: Evidence of a sale
• Purchase order / supplier invoice: Evidence of a purchase
• Bank statement / deposit slip: Evidence of cash transactions
• Employee timesheet: Evidence of wages earned
• Contract: Evidence of obligations
• Receipt: Evidence of payment

Common Mistakes

• Recording revenue when cash is collected for a prior sale: If revenue was already recognized when the service was performed, do not record it again when cash arrives.
• Forgetting to indent credit accounts: This makes entries hard to read and signals sloppy work to reviewers.
• Unequal debits and credits: If they do not balance, there is an error. Always verify before moving on.
• Missing the explanation: Future readers (including auditors) need to understand why each entry was made.

Key Takeaways

• The general journal is the book of original entry where all transactions are first recorded in chronological order.
• Each entry includes date, accounts, debit/credit amounts, and an explanation.
• Follow the four-step process: identify accounts, classify, determine direction, apply debit/credit rules.
• Compound entries involve more than two accounts but debits must still equal credits.
• Every entry should be supported by a source document as objective evidence.

What’s Next

In Lesson 2, you will learn to post journal entries to the general ledger — transferring the journal’s chronological record into the organized, account-by-account structure of the ledger.

  借：現金          $50,000
  貸：業主資本      $50,000

  借：設備          $12,000
  貸：應付帳款      $12,000

  借：現金           $3,500
  貸：服務收入       $3,500

  借：設備          $15,000
  貸：現金           $5,000
  貸：應付票據      $10,000

  借方：現金        $50,000
  貸方：資本金      $50,000

  借方：設備        $12,000
  貸方：買掛金      $12,000

  借方：設備        $15,000
  貸方：現金         $5,000
  貸方：支払手形    $10,000