From source document to general journal

Learning goals

• Read transaction facts from common source evidence.
• Journalize simple and compound service-business entries.
• Use dates, account titles, indentation, explanations, and source references consistently.
• Explain what a document proves and what still needs judgment.

Prerequisite check

Write the normal balance of every major account category. Analyse: “Purchased supplies on account, $640.”

Vocabulary

• General journal: a chronological book of original entry.
• Journalizing: recording a transaction in journal form.
• Simple entry: one debit and one credit.
• Compound entry: more than two accounts.
• Invoice: a document describing goods or services and an amount payable or receivable.
• Receipt/remittance: evidence of payment or of how a payment should be applied.
• Posting reference (PR): a cross-reference between journal and ledger; it is completed when posting occurs.

Core idea

Journalizing turns evidence into a dated, balanced accounting decision. The document supplies facts; it does not choose the accounts automatically. You must identify the business purpose, timing, ownership, and payment terms.

Why this treatment makes sense

Chronological entries create a visible history and a place to explain the transaction. Consistent form lets another person trace what was decided and later follow the amount into each ledger account.

A repeatable method

Use E-JET:

1. E — Evidence: date, parties, amount, terms, business purpose, approval.
2. J — Journal analysis: accounts, classifications, increase/decrease, debit/credit.
3. E — Equal and explain: prove totals and add a concise explanation or reference.
4. T — Trace: leave the PR blank until posting, and preserve the authorized source link.

Worked example

Lakeview Resume Studio provides this original evidence for May:

• May 1: owner deposit record, $12,000 invested in the business.
• May 3: supplier invoice S-184, $900 of office supplies on 30-day credit.
• May 8: customer invoice C-042, $2,400 for completed services, due later.
• May 14: bank payment confirmation, $500 paid toward invoice S-184.
• May 20: cash receipt R-031, $1,500 received against customer invoice C-042.

General journal:

Reasonableness: May 14 reduces the supplier liability and May 20 reduces the customer asset. Neither records the original cost or revenue again.

Journal, ledger, and statement connection

The journal preserves order and explanation. Posting will sort entries by account in the ledger. Accounts Receivable ends with $900 from this customer-related activity; Accounts Payable ends with $400 from the supplier activity. Revenue $2,400 will affect profit; the collection will not.

Common mistakes

• Using the document issue date when the stated transaction date is different without investigating cutoff.
• Recording a quote, purchase order, or unsigned draft as if performance occurred.
• Crediting Revenue when collecting an old receivable.
• Debiting Expense when paying an old payable.
• Filling in posting references before posting.
• Hiding a correction by erasing the original trail. Use the authorized correction process.

Guided practice

Journalize:

1. June 2: Owner contributes $5,000 cash and $2,000 equipment, both supported.
2. June 4: Receive $900 cash from a customer for services next month.
3. June 10: Complete $300 of that work.
4. June 12: Receive a $160 internet bill for June, payable next month.

Independent practice

Journalize the following for Ember Tutoring and add short evidence-aware explanations:

• Aug. 1 paid $1,800 for three months of office rent in advance;
• Aug. 5 completed $1,250 of tutoring for cash;
• Aug. 9 completed $700 on account;
• Aug. 16 collected $450 from the Aug. 9 customer;
• Aug. 21 owner took $300 cash for personal use;
• Aug. 27 paid $220 for August advertising.

Self-check and solutions

Guided practice:

1. Dr Cash $5,000; Dr Equipment $2,000; Cr Owner, Capital $7,000.
2. Dr Cash $900; Cr Unearned Revenue $900.
3. Dr Unearned Revenue $300; Cr Service Revenue $300.
4. Dr Internet Expense $160; Cr Accounts Payable $160.

Independent practice: Aug. 1 Dr Prepaid Rent $1,800 / Cr Cash $1,800; Aug. 5 Dr Cash $1,250 / Cr Service Revenue $1,250; Aug. 9 Dr Accounts Receivable $700 / Cr Service Revenue $700; Aug. 16 Dr Cash $450 / Cr Accounts Receivable $450; Aug. 21 Dr Owner, Drawings $300 / Cr Cash $300; Aug. 27 Dr Advertising Expense $220 / Cr Cash $220. Prepaid Rent is used because the evidence states three future months; later adjustment recognizes the expired part.

Retrieval practice

List the journal form rules from memory. Explain the different credits for cash received from revenue, owner investment, a loan, a customer deposit, and a receivable collection.

Exam-style application

An invoice for $1,130 includes $1,000 of supplies and $130 tax. The course has not yet established the business's HST registration or account convention. What should you do instead of guessing one $1,130 Supplies debit?

Answer outline: Preserve the invoice, identify the tax jurisdiction/rate, determine whether the question treats the tax as recoverable or part of cost, and follow the supplied chart of accounts. If it is Ontario HST recoverable under the later course convention, debit Supplies $1,000 and HST Recoverable $130, then credit the payable $1,130. The key is to state the assumption, not invent it.

Lesson summary

A general-journal entry is a transparent accounting decision built from evidence. Read the event, choose accounts and sides, prove equality, explain, and preserve the trail.