Peter Marshall Bsc (Econ) BA MBIM is a Fellow of the Society of Business Teachers, and an experienced educator in business subjects. He is also a prolific author and his books have been translated and sold worldwide. He lives in London, UK.
A general purpose record
A book of prime entry, the journal is simply a place for making the first record of any transaction for which no other prime entry book is suitable. It has debit and credit columns, but they are simpler than those of the cash book and petty cash book. The journal itself is not part of the accounts, merely one of the sources from which the accounts are written up later on.
Examples of journal entries
Here are some examples of transactions you would need the journal to record:
- opening figures of a new business (e.g. list of assets)
- bad debts
- depreciation (e.g. of vehicles or equipment)
- purchase and sales of fixed assets (e.g. vehicles or plant)
- correction of errors
- goods taken for private use (as against for sale)
- ledger transfer needed if a book debt were sold.
Information needed for an entry
When entering a transaction into the journal, you need to record these aspects of it:
- accounts affected
- folio references
- amounts (debit and credit)
Write a brief explanation against each entry. Separate each new entry from the one above by ruling a horizontal line right across the page (see figure 26).
Sometimes it is a good idea to make combination double entries, i.e. where there is more than one debit entry per credit entry, or vice versa. This would be appropriate when journalising ‘opening figures’, which include various assets and liabilities, together with the capital figure to which they relate. A group of entries are recorded on the opposite page with the prefix ‘Sundries’, which all relate to trading in an old motor van for a new one.
On the next page we will see how to write up the journal step by step.
1. Journalise the following:
On 28 May 200X it is discovered that L. Cleaves’ a/c in the sales ledger has wrongly been debited with the sum of £60. Such sum should have been debited to L. Cleese’s a/c instead. Two days later, F. Evans, a debtor of the firm, is declared bankrupt and the firm expects no ultimate settlement of his a/c in the sum of £85.00.
2. Using the following information, calculate the capital, journalise the opening figures and post them to the ledger for A. Frazer, a retail stationer, who started business on 1 April 200X. Cash at bank £1,450.00, cash in hand £50.00, office equipment £1,500.00, land and buildings £54,000, fixtures and fittings £4,000.00, a motor van £3,000.00 and stock £2,000.