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Slide 17.

Chapter 17
The journal

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.2

Learning objectives
After you have studied this chapter, you
should be able to:
 Explain the purpose of having a journal
 Enter up the journal
 Post from the journal to the ledgers
 Complete opening entries of a new set of
accounting books in the journal and make
the appropriate entries in the ledgers
 Describe and explain the accounting cycle
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.3

The journal
 The journal is a form of diary to record unusual
transactions before they are posted in the
double entry accounts.
 A journal entry contains:
The date
The account to be debited and the amount
The account to be credited and the amount
An explanation of the transaction
A folio reference to the source documents
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.4

Typical uses of the journal


 The purchase and sale of fixed assets.
 Writing-off bad debts.
 The correction of errors in the ledger
accounts.
 Opening entries to open a new set of
books.
 Adjustments to any of the entries in the
ledgers.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.5

A journal page

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.6

Purchase and sale on credit


of non-current assets
A milling machine is bought on credit from
Toolmakers Ltd for £10,550 on 1 July
2012.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.7

Purchase and sale on credit


of non-current assets (Continued)

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.8

Purchase and sale on credit


of non-current assets (Continued)
Sale of van no longer required for £800 on
credit to K. Lamb on 2 July 2012.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.9

Purchase and sale on credit


of non-current assets (Continued)

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.10

Bad debts
A debt of £78 owing to us from H. Mander
is written off as a bad debt on 31 August
2012.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.11

Bad debts (Continued)

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.12

Correction of errors
J. Brew, after being in business for some
years without keeping proper records, now
decides to keep a double entry set of
books. On 1 July 2012 he establishes that
his assets and liabilities are as follows

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.13

Correction of errors (Continued)


Assets Liabilities
Van – £3,700 Accounts payable:
Fixtures – £1,800 M. Quinn – £129
Inventory – £4,200 C. Walters – £410
Accounts receivable:
B. Young – £95
D. Blake – £45
Bank – £860
Cash – £65

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.14

Correction of errors (Continued)

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.15

Correction of errors (Continued)

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.16

Adjustments to any of
the entries in the ledgers
K. Young, a debtor, owed £2,000 on 1 July
2013. He was unable to pay his account in
cash, but offers a 5-year-old car in full
settlement of the debit. The offer is
accepted on 5 July 2013.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.17

Adjustments to any of
the entries in the ledgers (Continued)

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.18

Adjustments to any of
the entries in the ledgers (Continued)
T. Jones is a creditor. On 10 July 2013 his
business is taken over by A. Lee to whom
the debt of £150 is now to be paid.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.19

Adjustments to any of
the entries in the ledgers (Continued)

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.20

Adjustments to any of
the entries in the ledgers (Continued)
We had not yet paid for an office printer we
bought on credit for £310 because it was
not working properly when installed. On 12
July 2013 we returned it to the supplier, RS
Ltd. An allowance of £310 was offered by
the supplier and accepted. As a result, we
no longer owe the supplier anything for the
printer.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.21

Adjustments to any of
the entries in the ledgers (Continued)

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.22

The accounting cycle for a


profit-making organisation

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.23

Learning outcomes
You should now have learnt:
1. What the journal is used for
2. That the journal is the collection place for
items that do not pass fully through the
other five books of original entry
3. That there is a range of possible types of
transactions that must be entered in the
journal

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.24

Learning outcomes (Continued)


4. That the opening double entries made on
starting a set of books for the first time are
done using the journal
5. How to make the opening entries for a
new set of books in the journal and in the
ledger accounts

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 17.25

Learning outcomes (Continued)


6. That the main parts of the accounting cycle
are as follows:
a. Collect source documents
b. Enter transactions in the books of original
entry
c. Post to ledgers
d. Extract trial balance
e. Prepare the income statement
f. Draw up the statement of financial position
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012