Which tool is primarily used to record business transactions by applying the rules of debits and credits?

• A. Bank Reconciliation Statement
• B. Balance Sheet
• C. General Journal
• D. Trial Balance

Answer: (C)

Verified step by step guidance

1. Understand the purpose of the General Journal: It is the primary tool used to record business transactions in chronological order, applying the rules of debits and credits.
2. Learn the rules of debits and credits: Debits increase asset and expense accounts, while credits increase liability, equity, and revenue accounts.
3. Recognize the structure of a General Journal entry: Each transaction is recorded with a date, account names, debit amounts, and credit amounts, ensuring the total debits equal total credits.
4. Differentiate the General Journal from other tools: The Bank Reconciliation Statement reconciles bank records with company records, the Balance Sheet summarizes financial position, and the Trial Balance checks the accuracy of ledger accounts.
5. Understand the importance of the General Journal: It serves as the foundation for transferring transactions to the ledger accounts, ensuring accurate financial reporting.