Journal Entry

1. Describe the purpose and structure of a journal entry.

2. Identify the purpose of a journal.

3. Define “trial balance” and indicate the source of its monetary balances.

4. Prepare journal entries to record the effect of acquiring inventory, paying salary, borrowing money, and selling merchandise.

5. Define “accrual accounting” and list its two components.

6. Explain the purpose of the revenue realization principle.

7. Explain the purpose of the matching principle.

Question: In an accounting system, the impact of each transaction is analyzed and must then be recorded. Debits

and credits are used for this purpose. How does the actual recording of a transaction take place?

Answer: The effects produced on the various accounts by a transaction should be entered into the accounting

system as quickly as possible so that information is not lost and mistakes have less time to occur. After analyzing

each event, the financial changes caused by a transaction are initially recorded as a journal entry. A list of all

recorded journal entries is maintained in a journal (also referred to as a general journal), which is one of the most

important components within any accounting system. The journal is the diary of the company: the history of the

impact of the financial events as they took place.