Recall the lesson on the books of prime entry. The books of prime entry discussed were listed to include sales journal, purchases journal, sales returns journal, purchases returns journal, the cashbook as well as the journal proper.
While others were treated, the discussion of the journal proper was deferred to this chapter.
The Journal Proper or simply put as the journal is a book of prime entry that records transactions that are not captured by any of the other books of prime entry. Some would refer to the journal as a diary of transactions.
The journal plays significant roles in the recording phase of accounting as it is used for varied purposes:
a. It helps to eliminate fraud and other accounting irregularities by providing explanations to the transactions that are recorded in it.
b. It gives transaction posting guides as to which account to be debited and which to be credited.
Uses of the Journal
The journal is used for
1) Correcting accounting errors
2) Opening new entries
3) Recording of sale and purchase on credit of non-current assets
4) Transfer from one account to other account(s)
5) Non-cash drawings
Format of a Journal Proper
The following journal of myFATutor Dot Com is given as format of a journal.
Information content of a Journal
From the sample journal of myFATutor given above, it can be deduced that a typical journal should, among other things, contain the following information:
Ø Date of the transaction
Ø Reference number of the supporting document(s)
Ø Name and Account number of the account to be debited
Ø Name and account number of the account to be credited
Ø Amount debited and credited
Ø Narration (explanation) for the transaction journalized
In practice, the following should be included:
vTotal column as more than one account can be debited at the same time.
vName and signature of the initiating officer
vName and signature of the authorizing officer
Note
The journal proper is not part of the double entry system. It only serves as a starting point because entries made in it are used to record transactions in double entry form.
Examples Involving the Use of the Journal
Correcting accounting errors
Recall the treatment of errors in chapter xxx. Some further examples are given below
Example1
On 5th January, 20v3, a computer was purchased for $3,500 in cash and the following entries were erroneously made
Obviously, an error has been made in the above entries. Instead of debiting Computers (a non-current asset), computer maintenance (an expenses) is wrongly debited.
The correction is now treated as shown below
Example 2
On 8th January, 20v3, goods worth $65,000 were sold on credit to Excuse Enterprises and the account of Excuse Ventures was wrongly debited.
The correction is effected as follows
Example3
A cheque of N105,000 was received from Journal-P Ent and the cashier debited Journal-P Ent and credited cashbook accordingly.
The correction of the above error is shown thus
Opening of Entries
Example4
Jos Ikiokpotso started business with the following details as at 1st July, 20v6
It is required to open the various books so that transactions can be posted to the books accordingly.
To open the books, a journal will first have to be opened as shown below
And the books of account are now opened as shown below.
First is the Motor Van account
As can be seen above, the motor van is having a debit balance. This is arrived at immediately after every transaction is posted. Recall the lesson on ledgers. There is no need posting in T-Form as much rush work will be required at the end of the period when balances are to be extracted. With this, the balance is known at a go.
Next is the Stock account
Following the stock is the Bank account presented as shown below
Cash account is now equally presented as shown below
Finally, Capital account is presented as shown below. Kindly take note that capital account balance of N541,500 shown in parenthesis does not mean that it is a negative balance. The parenthesis is merely showing that the balance is in credit.
Recording of sale and purchase on credit of non-current assets
Example5
On 1st March, 20x5, Odikoko bought an office furniture on credit from Itsalolai for $23,000. Record the above in the journal of Odikoko
Example6
On 1st October, 20v7, a Delivery Van is sold to Amamah on credit for N950,000. Show the entries in the journal
Solution to question6
Transfer from one Account to other Account(s)
Example7
Heteland Ventures owes Tutor Enterprises an amount of N1,050,000. On June, 20th 20x8, Meteland Ventures acquires Heteland Ventures and takes over the assets and liabilities of Heteland. Show the journal entries necessary to transfer the indebtedness.
Solution to Question7
Example8
Williamson is owed a sum of N2,500. On 22ndApril, 20x0, the news of his demise was heard. He died testate and willed all his assets and liabilities to his only child, Kukuson. Show a journal to pass the entries.
Solution to Question8
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