Illustration of a Journal

ILLUSTRATING THE ACCOUNTING JOURNAL:  The following illustration draws upon the facts for the Xao Corporation. Specifically it shows the journalizing process for Xao's transactions.  You should review it carefully, specifically noting that it is in chronological order with each transaction of the business being reduced to the short-hand description of its debit/credit effects.  You will also note that each transaction is followed by a brief narrative description; this is a good practice to provide further documentation.  For each transaction, it is customary to list "debits" first ( flush left), then the credits (indented right).  Finally, notice that a transaction may involve more than two accounts; the corresponding journal entry for these complex transactions is called a "compound" entry.  As you review the general journal for Xao, note that it is only two pages long.  An actual journal for a business might consume hundreds and thousands of pages to document its many transactions.  As a result, some businesses may maintain the journal in electronic form only.  As you review Xao's general journal, notice that you can get a little help with the debit/credit rules by clicking on the account name within the journal.  This helpful tool is maintained throughout the remainder of the book. GENERAL JOURNAL                                                                Page 1 Date Accounts   Debits Credits 1-1-X3 Cash   25,000               Capital Stock     25,000   Issued stock to shareholders, in exchange for cash                 1-4-X3 Advertising Expense   2,000               Cash     2,000   Paid advertising expense for initial advertising programs                 1-8-X3 Cash   4,000               Service Revenue     4,000   Provided services to customers for cash                 1-15-X3 Utility Expense   1,000               Accounts Payable     1,000   Received bill for utility costs incurred                 1-17-X3 Accounts Receivable   8,000               Service Revenue     8,000   Provided services to customers on account                 1-18-X3 Accounts Payable   500               Cash     500   Paid half of the amount due on the utility bill received on January 15       GENERAL JOURNAL                                                                Page 2 Date Accounts   Debits Credits           1-25-X3 Cash   4,800               Accounts Receivable     4,800   Received 60% of the amount due on the receivable that was established on January 17                 1-28-X3 Land   15,000               Cash     5000             Note Payable     10,000   Purchased land by giving $5,000 cash, and promising to pay the remainder in 90 days                 Now that you have reviewed the journal entries for January, consider a few more points.