Page 74 - Accounting Principles (A Business Perspective)

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account. Any necessary explanation of a transaction appears on the line(s) below the credit entry and is
indented halfway between the accounts debited and credited. A journal entry explanation should be concise
and yet complete enough to describe fully the transaction and prove the entry's accuracy. When a journal

entry is self-explanatory, we omit the explanation.
• Posting reference column. This column shows the account number of the debited or credited account.
For instance, in Exhibit 8, the number 100 in the first entry means that the Cash account number is 100. No
number appears in this column until the information has been posted to the appropriate ledger account.
We discuss posting later in the chapter.
• Debit column. In the debit column, the amount of the debit is on the same line as the title of the account
debited.

• Credit column. In the credit column, the amount of the credit is on the same line as the title of the
account credited.

An account perspective:

Uses of technology

Preparing journal entries in a computerized system is different than in a manual system. The
computer normally asks for the number of the account to be debited. After you type the account
number, the computer shows the account title in its proper position. The cursor then moves to the
debit column and waits for you to enter the amount of the debit. Then it asks if there are more
debits. If not, the computer prompts you for the account number of the credit. After you type the
account number, the computer supplies the account name of the credit and enters the same

amount debited as the credit. When there is more than one credit, you can override the amount
and enter the correct amount. Then you would enter the other credit in the same way. If your
debits and credits are not equal, the computer warns you and makes you correct the error. You can
supply an explanation for the entry from a standard list or type it in. As you enter the journal
entries, the computer automatically posts them to the ledger accounts. At any time, you can have
the computer print a trial balance.

A summary of the functions and advantages of using a journal follows:
The journal—

• Records transactions in chronological order.
• Shows the analysis of each transaction in debits and credits.
• Supplies an explanation of each transaction when necessary.
• Serves as a source for future reference to accounting transactions.
• Eliminates the need for lengthy explanations from the accounts.
• Makes possible posting to the ledger at convenient times.
• Assists in maintaining the ledger in balance because the debit(s) must always equal the credit(s) in each

journal entry.

Accounting Principles: A Business Perspective 75 A Global Text