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JOURNAL.DOC
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1987-03-11
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Introduction
------------
GL's General Journal was specifically designed to resemble Chapter One of any
good elementary accounting textbook. Most other GL's seem to be written for
bookkeepers with years of experience, who can quickly make the mental leap to
the weird accounting styles typically seen in low-budget PC software. But
novices are left out in the cold.
If you need a brief tutorial on bookkeeping, review the material at the
beginning of the Chart of Accounts documentation. It's not a complete
discussion, but it's better than nothing.
Journal
-------
Your General Journal is a fundamental document, the daily record of your
financial transactions. The rest of your bookkeeping system refers to the
General Journal time and time again. Here are the ground rules:
GL's "working metaphor" is the standard T-Account. You SEE these when you
enter your data in the General Journal.
That means, you enter data in a VISUAL journal in COLUMNS instead of using
negative numbers. You will be shown a header, as it might appear in your
General Ledger. You enter your transaction, and then you are shown a screen
with the actual Journal entry as it will appear.
Debit means left column. Credit means right column. Use the hyphen key
(MINUS SIGN) to flip from the credit to the debit column on your General
Journal worksheet, or vice-versa.
NEGATIVE NUMBERS ARE NEVER ALLOWED on the worksheet. The effect of any entry
on an account balance, whether it increases or decreases the balance, depends
on the column in which you enter the transaction amount, and on the type of
account. Therefore, if you are in the "wrong" column, hit the hyphen key.
If your entry in a column would (normally) be meaningless or incorrect, you
will get a "THIMK" message which suggests that you shouldn't (ordinarily) do
that. However, GL doesn't PROHIBIT the action, it only lets you know that
you're doing something unusual. Real blunders are not excused, though.
You continue entering values into T-Accounts until the running balance for the
transaction goes to zero. You will then be shown a Journal Worksheet screen
and asked whether you wish to accept the entry into your Journal as it stands.
You may press the Esc key at any time to quit or start over.
The top line of each account section has a reminder, either "+│-" or "-│+",
to jog your memory about which column increases the account balance and which
decreases it. Reversing entries will generally have opposite reminders,
except that an ASSET account (such as Cash) and an EXPENSE account will have
the same reminder, i.e., "+│-". Think about it a bit, and you'll see why.
Caveat!
-------
Not everything that is ALLOWED in double entry bookkeeping is APPROPRIATE in
all circumstances.
For example, while you certainly MAY, on occasion, credit an amount to an
Expense account (the opposite of usual practice), the EFFECT of this is to
assert an INCREASE IN INCOME. If this is what you mean, well and good. But
you may simply have made a mental error.
GL version 1.12 provides several ways to help you avoid mistakes, but won't
prohibit them. After all, once in a while, a "mistake" is exactly what you
NEED to do. (For example, when entering beginning balances!)
If your combination of accounts in a transaction would be especially odd or
unusual, you will get a sudden "THIMK" message -- but the entry combination
will be allowed. By pressing the F9 key to turn off sound effects, you can
reduce the impact of the THIMK message.
("THIMK", of course, is IBM's famous variation on Murphy's Law from the
fabulous days of prehistoric computing.)
So... Books that balance may still be incorrect, which is why Accountants
make big bucks, and Bookkeeping can be automated. GL's general journal can be
very helpful in keeping your affairs straight, but only if you keep your head
(while all about you....)
Examples
--------
Some typical entries, assuming a simple Chart of Accounts, follow. Note that
transactions are always entered beginning in the left (debit) column. This is
the STRICT interpretation; most accounting programs don't insist on it, since
it doesn't make any difference to the computer. However, this is the sort of
thing that reassures auditors, so GL requires it: DEBIT YOUR FIRST ENTRY IN
ALL TRANSACTIONS.
These are just examples, not advice, and I don't pretend they are absolutely
correct or the only way to do things:
a) You receive cash from sales.
Debit CASH (Asset)
Credit SALES (Revenue).
b) You buy office supplies and write a check.
Debit OFFICE SUPPLIES (Expense)
Credit CASH (Asset).
c) You buy office supplies and charge it.
Debit OFFICE SUPPLIES (Expense)
Credit ACCOUNTS PAYABLE (Liability)
d) You write a check to pay outstanding bills.
Debit ACCOUNTS PAYABLE (Liability)
Credit CASH (Asset)
e) You sell something and your customer agrees to pay later.
Debit ACCOUNTS RECEIVABLE (Asset)
Credit SALES (Revenue)
f) You take $50 out of your own company's till, for your own use.
Debit WITHDRAWALS (Equity)
Credit CASH (Asset)
g) You contribute $1,000 of your own money to your own company.
Debit CASH (Asset)
Credit CAPITAL (Equity)
h) You sell programming services to a client, and they pay cash.
Debit CASH (Asset)
Credit CONSULTING FEES (Revenue)
i) As part of the last transaction, you agreed to provide a Pascal
compiler to your client, which you must purchase. The full story
unfolds in stages.
1) You bought the Pascal compiler.
Debit REIMBURSABLES (Expenses)
Credit CASH (Asset)
2) You delivered the compiler to your client, and billed them.
Debit ACCOUNTS RECEIVABLE (Asset)
Credit REIMBURSABLES (Expense)
3) They finally sent you a check for the compiler.
Debit CASH (Asset)
Credit ACCOUNTS RECEIVABLE (Asset)
j) You paid your credit card bill for this month.
Debit ACCOUNTS PAYABLE (Liability)
Debit CREDIT CARD FINANCE CHARGES (Expenses)
Credit CASH (Asset)
k) You buy a delivery van and need to record the sales tax.
Debit EQUIPMENT (Asset)
Debit SALES TAX PAID (Expense)
Credit CASH (Asset)
l) Three of your clients pay their bills, but you make one deposit.
Debit CASH (Asset)
Credit A/R CLIENT #1 (Asset)
Credit A/R CLIENT #2 (Asset)
Credit A/R CLIENT #3 (Asset)
m) One of your creditors wins your IOU's from two other creditors in a
poker game, but eventually forgives the entire debt!
Debit IOU #3 (Liability)
Credit IOU #1 (Liability)
Debit IOU #2 (Liability)
Credit IOU #1 (Liability)
Debit IOU #1 (Liability)
Credit POKER LOSSES (Expense)
n) You win $74 betting on the ponies.
Debit CASH (Asset)
Credit DUMB LUCK (Revenue)
o) You have to take back that Pascal compiler, the client doesn't want it.
Debit RETURNS (Expense)
Credit ACCOUNTS RECEIVABLE (Asset)
And so forth. Add your own reminders from here on. There are other Typical
Transactions not mentioned here, such end-of-period adjusting entries,
depreciation, Federal taxes, etc. You should consult YOUR OWN PROFESSIONAL
ACCOUNTANT about these.