1. THE JOURNAL CHAPTER 17

2. 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.

3. Sales day book Sept 7 A.Bill 16 S.Dil 18 W.Pat 26 Z.Lan Note no 9.22 9.32 9.55. 9.36 Folio PL 29 PL 30 PL31 PL32 $ 40 240 30 360 Purchase day book Sept 7 A.Bill 16 S.Dil 18 W.Pat 26 Z.Lan Note no 4.22 4.32 4.55. 4.36 Folio PL 23 PL 30 PL62 $ 50 280 354 456 Cr 1,500 JOURNAL day book Dec 2 Machinery bought from Toolmakers Ltd Folio GL 55 PL45 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

4. What the journal looks like Cr 1,500 JOURNAL Dec 2 Machinery bought from Toolmakers Ltd Folio GL 55 PL45 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

5. 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

6. 1.The purchase or sale of a fixed asset on credit The 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 JOURNAL Dec 2 Machinery bought from Toolmakers Ltd on credit. Invoice number 7/159 Folio GL 55 PL45 Dr 10,550

7. 2. Writing-off bad debts When 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 JOURNAL Dec 2 Bad debt. M.Fletcher. Debt written-off, see letter in file in customer’s file Folio GL 16 SL45 Dr 78

8. 3. Opening entries Some 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 – 3000 Fixtures – 1,800 Inventory – 2,000 Liabilities: Accounts payable – 150 Bank loan - 500 Cr 150 500 6,150 JOURNAL Jan 1 Van Fixtures Inventory a/c payable Bank loan Capital Folio GL 1 GL 2 GL 3 PL 1 PL 2 Dr 3,000 1,800 2,000 The owner’s capital (Assets – Liabilities)

9. 4. Corrections from any of the other ledgers M.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.Jackson May 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.Jackson May 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 JOURNAL May 31 M.Jacks M.Jackson Cheque received, entered in to wrong a/c. now corrected Folio SL 1 Dr 100

10. 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 2 H.Niell (car). Accepted car as payment to settle her debt Folio GL 11 SL 68 Dr 2,000

11. 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-accounts c. 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.

12. Make a display poster of exhibit 17.2 (page 200)