Recording Transactions in a General Journal, Page 11

Steps to Journalize a Business Transaction

Journalizing involves four main steps: 

1. Analyzing 
2. Applying the rules of debit and credit
3. Preparing a T Account 
4. Passing a journal entry

Analyzing 

The process of analyzing consists of the following steps: 

• Identifying the transaction and the accounts that are affected by the transaction 
• Classifying the accounts as assets, liabilities, or owner's equity 
• Determining the amount by which the accounts should be increased or decreased

Applying the Rules of Debit and Credit

The rules of debit and credit are applied to determine: 

• The account to be debited 
• The account to be credited 
• The amount to be debited or credited

Following the rules of debit and credit will minimize the error in accounting. It will also help ensure that the debit amount is always equal to the credit amount in a transaction.