Journals & Ledgers

T account: An illustration

Cash

Debit Credit

Balance b/f 450.00 7 Jan Wages

expense

150.00

2 Jan Sales 200.00 15 Jan Electricity

expense

120.00

5 Jan Sales 350.00 Balance c/f 730.00

1,000.00 1,000.00

Balance b/f 730.00

Ledger account: An illustration

Cash Debit Credit

Balance b/f 450.00

2 Jan Sales 200.00

5 Jan Sales 350.00

7 Jan Wages expense 150.00

15 Jan Electricity expense 120.00

Balance c/f 730.00

1,000.00 1,000.00

Balance b/f 730.00

Introduction Journal entries entered into a journal

Small number of transactions General Journal

Large number of transactions Specialised Journals (also called

Subsidiary Books)

Each journal will record transactions of a similar nature

Why?

To have more than 1 person involved in the recording process.

More efficient saves time & effort, since the entries are automatically classified.

Subdivision of Journals & Ledgers Journals can be subdivided to: Purchases Journal (or Accounts Payable or

Creditors Journal)

Sales Journal (or Accounts Receivable or Debtors Journal)

Cash Payments Journal

Cash Receipts Journal

Returns Inwards Journal (Sales Returns Journal)

Returns Outwards Journal (Purchases Returns Journal)

General Journal whatever thats not recorded in the above

Subdivision of Journals & Ledgers

Ledgers can be subdivided to: Purchases Ledger (Accounts Payable or Creditors

Ledger for individual creditors

Sales Ledger (Accounts Receivable or Debtors Ledger) for individual debtors

Cash Book for all cash/cheque transactions

General Ledger for all other accounts other than the above.

Purchases Journal

To record credit purchases, based on purchase invoices.

Purchase invoice is issued by the supplier of goods with details of goods purchased (quantity/amount, price per

unit, total price)

At the end of a regular period (daily/weekly/ monthly), the total of

purchases journal entries are transferred

to the General Ledger.

Sales Journal

To record credit sales to customers, based on sales invoices.

Sales invoice is issued by the business to the customer of goods with details of goods sold (quantity/amount, price per

unit, total price)

At the end of a regular period (daily/weekly/ monthly), the total of sales

journal entries are transferred to the

General Ledger.

Purchases Returns/Returns

Outwards Journal To record goods returned by a business to

its suppliers.

When goods are returned, the supplier sends a credit note.

Credit note states how much refund the business is entitled to.

At the end of a regular period (daily/weekly/ monthly), the total of

purchases returns entries are transferred

to the General Ledger.

Sales Returns/Returns Inwards

Journal To record goods returned by customers to

the business.

When goods are returned, the business issues a credit note to the customer.

Debit note states how much refund the customer is entitled to.

At the end of a regular period (daily/weekly/ monthly), the total of sales

returns entries are transferred to the

General Ledger.