What you’ll learn to do: Identify the accounting books of record

As you’ve seen, after recognizing a business event as a business transaction, we analyze the event to determine its increase or decrease effects on the assets, liabilities, owner’s (stockholder’s) equity items, dividends, revenues, or expenses of the business. After the analysis, we translate these increase or decrease effects into debits and credits.

In each business transaction we record, the total dollar amount of debits must equal the total dollar amount of credits. When we debit one account (or accounts) for $100, we must credit another account (or accounts) for a total of $100. Double-entry accounting requires that each transaction is recorded by an entry that has equal debits and credits.

Now, the question we must answer is, where and how exactly do we record these transactions?

In step two of our 10-step process, we see that the first place to record a transaction is called a journal. Even if you are using a computer system (which is likely), you’ll be entering transactions as debits and credits into a journal. Let’s find out what a journal is, what it looks like, and how it is related to the ledger and the trial balance.