THE JOURNAL

CHAPTER 17

Books of original entry (day books)So far we have learnt that most transactions are entered in to the following:•Cash book•Sales day book•Purchase day book•Returns inwards day book•Returns outwards day book

Any transactions that do not ‘fit’ in to any of the above day books are

entered in to the Journal.

Sales day book

Sept 7 A.Bill 16 S.Dil 18 W.Pat 26 Z.Lan

Note no9.229.329.55.9.36

FolioPL 29PL 30PL31PL32

$40

24030

360

Purchase day book

Sept 7 A.Bill 16 S.Dil 18 W.Pat 26 Z.Lan

Note no4.224.324.55.4.36

FolioPL 23PL 30PL62PL62

$50

280354456

Cr

1,500

JOURNAL day book

Dec 2 Machinery bought from Toolmakers Ltd

Folio

GL 55PL45

Dr

1,500

Purchase Ledger

Sales Ledger

General Ledger

1. We have our 5 day books, where we record all our transactions

2. We enter these into the relevant T-a/c

3. We then sort these in to the correct Ledgers

4. For one-off transactions, we use the ‘Journal’

5. We record this in the General Ledger

What the journal looks like

Cr

1,500

JOURNAL

Dec 2 Machinery bought from Toolmakers Ltd

Folio

GL 55PL45

Dr

1,500

The journal is NOT a T-a/c. it gives instructions as to what a/c should be

debited and credited. You must remember there are 3 instructions:

1.The a/c to be debited

2.The a/c to be credited

3.A description of the transaction

When would we use a journal?

1. The purchase or sale of a fixed asset on credit

2. Writing-off bad debts

3. Opening entries

4. Corrections from any of the other ledgers

5. Adjustments to any of the entries in the ledgers

1. The purchase or sale of a fixed asset on creditThe transaction involves the acquisition of an asset and a new liability

Machinery

Jul 2 Toolmakers J1 10,550

Toolmakers

Jul 2 Machinery J1 10,550

Cr

10,550

JOURNALDec 2 Machinery bought from Toolmakers Ltd on credit. Invoice number 7/159

Folio

GL 55PL45

Dr

10,550

2. Writing-off bad debtsWhen a debt turns bad, we have to stop classing it as an asset and now class it as an expense.

Bad debts

Jul 2 M. Fletcher J3 78

M. Fletcher

Jul 2 Bad debt J3 78

Cr

78

JOURNALDec 2 Bad debt. M.Fletcher. Debt written-off, see letter in file in customer’s file

Folio

GL 16SL45

Dr

78

3. Opening entriesSome people who operate as a sole trader do not use accounting to record their transactions. This often causes many problems. So often, after the business is established, the owner will start using accounting to help the business operate smoothly. We use the journal as a starting point.

Assets:Van – 3000Fixtures – 1,800Inventory – 2,000

Liabilities:Accounts payable – 150Bank loan - 500

Cr

150500

6,150

JOURNAL

Jan 1VanFixturesInventorya/c payableBank loan

Capital

Folio

GL 1GL 2GL 3PL 1PL 2

Dr

3,0001,8002,000

The owner’s capital (Assets – Liabilities)

4. Corrections from any of the other ledgersM.Jacks paid us a cheque of 100 on 9 December 2011. the transaction was correctly entered into the cash book, but was incorrectly entered into M.Jackson’s a/c.

M.JacksonMay 18 Bank 100

The error was found on May 31.Debit M.Jackson’s a/c (to cancel out the error on the credit side of his a/c)Credit M.Jacks to enter the cheque

M.JacksonMay 18 Bank 100

May 31 M.Jacks 100 Error corrected

M.Jacks

May 31 cheque entered 100 in error to M.Jackson a/c

May 1 Balance b/d 100

Cr

100

JOURNALMay 31M.JacksM.JacksonCheque received, entered in to wrong a/c. now corrected

Folio

SL 1SL1

Dr

100

5. Adjustments to any of the entries in the ledgers

H.Niell (a debtor) owed 2,000. she was unable to pay her account, however offered her car as payment to settle the debt. Her personal a/c has been settled and now the business has a new asset (car).

Car

Jul 2 H.Niell J6 2,000

H.Niell

Jul 2 Car J6 2,000 Jul 2 Balance b/d 2,000

Cr

2,000

JOURNAL

Jul 2H.Niell (car). Accepted car as payment to settle her debt

Folio

GL 11SL 68

Dr

2,000

Answer these questions. (answers page 118)

For each example draw:a. The incorrect T-a/c using the information in the question.b. The correct T-accountsc. The journal (identifying the ledger the T-a/c can be found)

1. A new drilling machine was bought on credit from Toolmakers Ltd for 5,500 on July 5 2011

2. H.Pollard settled her debt (300) to us by giving us her laptop on Jan 2 2011

3. Some office furniture is sold on credit for 300 to K.King on July 2 2011

4. A debt of 78 owing from H.Mander is written-off as a bad debt on 31 August 2011

5. D.Long paid us 50 by cheque on May 18 2011. the transaction was correctly entered into the

cash book, however was entered into D.Longman’s a/c and not D.Long’s a/c. the errors was

identified on May 31.

6. The purchase of a motor car for 9,500 by cheque on May 14 2011 has been debited in error

to the motor expense a/c. It has been entered correctly in the cash book. (so the motor

expense a/c was debited, when it should have been credited)

7. Sales of 150 to T.Higgins on 13 May 2010 have been entered as 130. the error was found on

May 31.

Make a display poster of exhibit 17.2 (page 200)