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What Is a Bookkeeping Journal? What Is a Daybook?
In bookkeeping and accounting, a journal is a record of financial transactions, entered as they occur.
"Transactions" and their entry into a journal are usually the first steps in the accounting cycle, as Exhibit 1
below shows. The exceptions are situations where entries are first captured in a daybook (or book of original
entry) before they transfer to the journal.
The Journal
Historically, journals were always bounds as sewn-page bound notebooks in which bookkeepers hand wrote
entries shortly after the firm closed a sale, incurred an expense, earned revenues, or otherwise impacted the
firm's accounts.
Today, of course, journals usually exist as part of an accounting system software application. Users, therefore,
enter journal transactions either manually, through onscreen forms, or automatically, as with a point-of-sale
system. Also, most accounting systems provide user guidance and error-checking to help ensure that entries
register correctly as debits or credits in the appropriate accounts. And, the software also automates the second
stage of the accounting cycle, posting journal entries to a ledger.
The name "journal," from Old French and Latin origins, suggests a daily activity (jouris French for "day").
Personal diaries and newspapers are sometimes called journals for the same reason. While other accounting
records may update less frequently, journals update either continuously or at least daily. As a result, the journal
builds a running list of account transactions as they occur. Consequently, should anyone ask which actions
happened on a given day, the journal provides the answer.
Daybooks
Firms sometimes use one or more daybooks (or books of original entry) instead of the journal as the first data
entry point for transactions. Entries in daybooks build in chronological order, just as they do in journals. Entries
in the firm's various daybooks are frequently transferred to the firm's "journal," and then ultimately to the
ledger. With daybooks, in other words, the journal becomes the second step in the accounting cycle, while the
ledger becomes third.
What is a Ledger?
In bookkeeping and accounting, a ledger is a book (or record) for collecting historical transaction data from a
journal and organizing entries by account.
The ledger provides the transaction history and current balance in each accounting system account, throughout
the accounting period. At the end of the period, ledgers, therefore, serve as the authoritative source of data for
building a firm's financial accounting reports.
• The Income statement is mostly a summary of account activity for the period in the firm's Revenue and
Expense Accounts.
• The Balance sheet is mostly a summary of the current balances in the firm's Assets, Liabilities, and
Equities accounts, as they stand at the period end.
Basic accounting equation quiz The basic
accounting equation is Assets = Liabilities + __________.
1. Which of the following will cause owner's equity to increase?
[Link]
[Link] Draws
[Link]
2. Which of the following will cause owner's equity to decrease?
[Link] Income
[Link] Loss
[Link]
3. The accounting equation should remain in balance because every transaction affects how many
accounts? [Link] One
[Link] Two
[Link] Or More
4. A corporation's net income is eventually recorded in the following stockholders' equity account:
__________
5. A corporation's quarterly __________ will cause a reduction in the corporation's retained
earnings, which in turn reduces the corporation's stockholders' equity. However, this will not
reduce the corporation's net income.
6. The financial statement with a structure that is similar to the accounting equation is the
___balance sheet_______
7. The financial statement that reports the portion of change in owner's equity resulting from
revenues and expenses during a specified time interval is the __________
8. Using the basic accounting equation identify the missing item. Assets = 8969 Liabilities = 13738
Capital = 1000 Retained Earnings = ? a. -5,469
b. 5,769
c. -5,769
9. The accounting equation is a mathematical principle?
a. True
b. False
10. What does the accounting equation form the basis for?
a. Single entry bookkeeping
b. Cash books
c. Double entry bookkeeping
11. Tick some assets that a business can own
a. Cash
b. Office equipment
c. Loans
d. Machinery
e. Subscriptions
f. Vehicles
g. Overheads
h. Account Receivables
12. All the accounts under assets, liabilities and equity are called
a. Variable
b. Permanent
c. Temporary
13. Tick some of the liabilities that a business can owe
a. Bank loans
b. A building
c. Borrowed Funds
d. Income
e. Accounts Payable
f. Sales
14. What are accounts under the revenue and expenses known as?
a. Variable
b. Permanent
c. Temporary
15. What accounting report are assets, liabilities and equity shown on?
a. Balance Sheet
b. Profit and Loss statement
c. Loan statement
16. What does the balance sheet indicate about the business?
a. The financial condition
b. The business made a profit
c. The names of all the customers