Which of the following statements is correct regarding a journal in accounting?

• A. A journal summarizes account balances at the end of the period.
• B. A journal is used exclusively to prepare financial statements.
• C. A journal only records credit transactions and excludes debits.
• D. A journal is a chronological record of all business transactions, showing both debits and credits for each entry.

Answer: (D)

Verified step by step guidance

1. Understand the concept of a journal in accounting: A journal is a book or digital record where all business transactions are recorded in chronological order. It includes both debit and credit entries for each transaction.
2. Clarify the purpose of a journal: It serves as the first step in the accounting cycle, capturing the details of transactions before they are posted to the ledger accounts.
3. Analyze the incorrect options: Review why the other statements are incorrect. For example, a journal does not summarize account balances (this is done in the ledger), nor is it exclusively used for preparing financial statements, and it records both debit and credit transactions, not just credit transactions.
4. Identify the correct statement: The correct statement is that a journal is a chronological record of all business transactions, showing both debits and credits for each entry.
5. Relate the journal to the accounting cycle: Explain how journal entries are later posted to ledger accounts, which are then used to prepare trial balances and financial statements.