Accounting and Finance for Lawyers
A journal is a chronological record of changes in a company's assets, liabilities, shareholders' equities, revenues, and expenses. These can then be added up to make a balance sheet.
To make a double-entries in a general journal, the three questions are:
- What has happened?
- Which accounts are affected?
- In which direction are the affected accounts?
E.g., if someone contributes $5,000 in exchange for stock, and $2,000 is used to buy supplies, half on credit:
O/E means owner's equity.
A/R means accounts receivable.
N/R means notes receivable.
A journal will include the entries for both the balance sheet and the income statement.