Recording Transactions in a General Journal: Introduction
Businesses maintain their accounts to know the profit or loss incurred during a period. Maintaining accounts involves:
- Entering into a business transaction
- Collecting and verifying the sources of documents
- Analyzing each transaction and entering it in the journal under the double entry system
Generally, accounts are prepared for a year (known as the accounting period). During the accounting period, a number of activities take place. These activities are part of the accounting cycle, and are are carried out in steps. After the last step is completed, a new accounting cycle begins for the next year.