THE USE OF GENERAL JOURNALS AND OPENING AND CLOSING ENTRIES OF GENERAL JOURNALS.
Subject:
ACCOUNTING
Term:
FIRST TERM
Week:
WEEK 6
Class:
SS 1
Topic:
GENERAL JOURNALS
Behavioural objectives:
At the end of the lesson, the learners will be able to
- explain the uses of general journals
- discuss journal opening and closing entries of general journals
- correct errors through journals
- identify the types of journals
Previous lesson:
The pupils have previous knowledge of
ACCOUNTING CONCEPTS AND CONVENTIONS
that was taught as a topic in the previous lesson
Instructional Materials:
- Wall charts
- Pictures
- Related Online Video
- Flash Cards
- Receipts
- Invoice
Methods of Teaching:
- Class Discussion
- Group Discussion
- Asking Questions
- Explanation
- Role Modelling
- Role Delegation
Reference Materials:
- Scheme of Work
- Online Information
- Textbooks
- Workbooks
CONTENT
The uses of general journals
A general journal is a book of original entry in which transactions are recorded as they occur. This type of journal is also known as a daily diary or an unbound ledger. In double-entry bookkeeping, a general journal is used to record all transactions that cannot be classified into one of the other special journals.
Some examples of transactions that are typically recorded in a general journal are:
1. Sales on account
2. Purchases on account
3. Cash receipts
4. Cash payments
5. Depreciation expense
6. Rent expense
7. Wages expense
8. Insurance expense
9. Interest expense
10. Miscellaneous expenses
1. Sales on account are transactions in which goods or services are sold but the payment is not received immediately. The amount of the sale is recorded as a credit in the Accounts Receivable account and a debit is recorded in the Sales account.
2. Purchases on account are transactions in which goods or services are purchased but the payment is not made immediately. The amount of the purchase is recorded as a debit in the Accounts Payable account and a credit is recorded in the Purchases account.
3. Cash receipts are transactions in which cash is received. The amount of cash received is recorded as a credit in the Cash account.
4. Cash payments are transactions in which cash is paid out. The amount of cash paid is recorded as a debit in the Cash account.
5. Depreciation expense is an expense that is incurred over time as a result of the wearing out or obsolescence of equipment or property. The amount of depreciation expense is recorded as a debit in the Depreciation Expense account and a credit is recorded in the Accumulated Depreciation account.
6. Rent expense is an expense that is incurred for the use of property. The amount of rent expense is recorded as a debit in the Rent Expense account and a credit is recorded in the Cash or Accounts Receivable account, depending on whether the rent has been paid or not.
7. Wages expense is an expense that is incurred for the payment of wages to employees. The amount of wages expense is recorded as a debit in the Wages Expense account and a credit is recorded in the Cash or Accounts Payable account, depending on whether the wages have been paid or not.
8. Insurance expense is an expense that is incurred for the payment of insurance premiums. The amount of insurance expense is recorded as a debit in the Insurance Expense account and a credit is recorded in the Cash or Accounts Payable account, depending on whether the insurance premium has been paid or not.
9. Interest expense is an expense that is incurred for the payment of interest. The amount of interest expense is recorded as a debit in the Interest Expense account and a credit is recorded in the Cash or Accounts Payable account, depending on whether the interest has been paid or not.
10. Miscellaneous expenses are expenses that do not fit into any of the other categories. The amount of the miscellaneous expense is recorded as a debit in the Miscellaneous Expense account and a credit is recorded in the Cash or Accounts Payable account, depending on whether the expense has been paid or not.
Evaluation
1. What is a general journal?
2. What are some examples of transactions that are typically recorded in a general journal?
3. What is the purpose of a general journal?
4. How does a general journal differ from other types of journals?
5. What are the benefits of using a general journal
1. What is a general journal?
A. A type of journal used to record all transactions that cannot be classified into one of the other special journals.
B. A type of journal used to record only sales transactions.
C. A type of journal used to record only cash transactions.
D. A type of journal used to record only transactions that affect the equity of the business.
2. What types of transactions are typically recorded in a general journal?
A. Sales on account
B. Purchases on account
C. Cash receipts
D. All of the above
3. How is a sale on account recorded in a general journal?
A. As a debit to the Sales account and a credit to the Accounts Receivable account
B. As a debit to the Accounts Receivable account and a credit to the Sales account
C. As a debit to the Cash account and a credit to the Sales account
D. As a debit to the Sales account and a credit to the Cash account
4. How is a purchase on account recorded in a general journal?
A. As a debit to the Accounts Payable account and a credit to the Purchases account
B. As a debit to the Purchases account and a credit to the Accounts Payable account
C. As a debit to the Cash account and a credit to the Accounts Payable account
D. As a debit to the Accounts Payable account and a credit to the Cash account
5. How is a cash receipt recorded in a general journal?
A. As a debit to the Accounts Receivable account and a credit to the Cash account
B. As a debit to the Cash account and a credit to the Accounts Receivable account
C. As a debit to the Accounts Payable account and a credit to the Cash account
D. As a debit to the Cash account and a credit to the Accounts Payable account
1. What is a general journal?
A. A type of journal used to record all transactions that cannot be classified into one of the other special journals.
2. What types of transactions are typically recorded in a general journal?
A. Sales on account
B. Purchases on account
C. Cash receipts
D. All of the above
3. How is a sale on account recorded in a general journal?
A. As a debit to the Sales account and a credit to the Accounts Receivable account
4. How is a purchase on account recorded in a general journal?
A. As a debit to the Accounts Payable account and a credit to the Purchases account
5. How is a cash receipt recorded in a general journal?
A. As a debit to the Accounts Receivable account and a credit to the Cash account
B. As a debit to the Cash account and a credit to the Accounts Receivable account
C. As a debit to the Accounts Payable account and a credit to the Cash account
D. As a debit to the Cash account and a credit to the Accounts Payable account
Journal opening and closing entries of general journals.
Journal entries are made in a general journal to record transactions that cannot be classified into one of the other special journals. The first entry in a general journal is the opening entry. This entry sets up the balances in the accounts that will be used in the journal. The opening entry is typically made on the first day of the accounting period. The second type of entry in a general journal is the closing entry. This entry is made at the end of the accounting period and it transfers the balances in the temporary accounts to the appropriate permanent accounts. The closing entry is typically made on the last day of the accounting period.
There are two types of journal entries that can be made in a general journal:
1. Transactions that affect only one account – These journal entries are made to record transactions that affect only one account. The debit or credit is entered in the column for the affected account. For example, if office supplies are purchased for cash, the entry would be made as follows:
Debit
Credit
Office Supplies
200
Cash
200
2. Transactions that affect more than one account – These journal entries are made to record transactions that affect more than one account. The debit or credit is entered in the column for each affected account. For example, if office supplies are purchased on credit, the entry would be made as follows:
Debit
Credit
Office Supplies
200
Accounts Payable
200
Errors Affecting the Agreement of the Trial Balance.
There are three types of errors that can affect the agreement of the trial balance:
1. Errors in the recording of transactions – These errors occur when a transaction is not recorded in the journal or when a journal entry is made incorrectly. For example, if office supplies are purchased for cash but the transaction is not recorded in the journal, the trial balance will not agree because the Office Supplies account will be understated by $200 and the Cash account will be overstated by $200.
2. Errors in the posting of transactions – These errors occur when a journal entry is posted to the wrong account. For example, if office supplies are purchased on credit but the Accounts Payable account is not debited, the trial balance will not agree because the Office Supplies account will be overstated by $200 and the Accounts Payable account will be understated by $200.
3. Errors in the calculation of the trial balance – These errors occur when the trial balance is calculated incorrectly. For example, if the debit side of the trial balance is totaled as $5,000 and the credit side is totaled as $4,900, the trial balance will not agree because the total of the debit side is overstated by $100.
If the trial balance does not agree, it must be adjusted to bring the two sides into agreement. The following steps should be followed to adjust the trial balance:
1. Analyze the accounts that do not have a balanced debit and credit side.
2. Determine which side of the account (debit or credit) is overstated or understated.
3. Make an adjusting journal entry to correct the error.
4. Prepare a new trial balance.
5. Repeat steps 1-4 until the trial balance agrees.
After the trial balance has been adjusted and it agrees, the financial statements can be prepared.
The following is an example of how to adjust a trial balance that does not agree:
Trial Balance (before adjustment)
Debit
Credit
Cash
$1,000
Accounts Receivable
$500
Office Supplies
$200
Accounts Payable
$300
Salaries Expense
$400
Rent Expense
$100
Total
$2,700
Total
$2,700
As can be seen from the trial balance, the total of the debit side is overstated by $100 and the total of the credit side is understated by $100. This means that there is an error on the debit side of one account and an error on the credit side of another account.
To adjust the trial balance, the following journal entry is made:
Debit
Credit
Total
$100
Total
$100
This entry corrects the error on the debit side of one account and the error on the credit side of another account. After this entry is made, the trial balance will agree.
Introduction to Cash Book.
A cash book is a record of all cash receipts and cash payments made by a business. The cash book is used to prepare the following two financial statements:
1. The Cash Flow Statement – This statement shows how much cash came into the business and how much cash went out of the business during a period of time.
2. The Cash Budget – This statement shows how much cash the business expects to receive and how much cash the business expects to pay out during a period of time.
The cash book has two sides: the debit side and the credit side. The debit side is used to record all cash receipts and the credit side is used to record all cash payments.
The following is an example of a cash book:
Cash Book
Debit side
Credit side
Date
Receipts
Payments
Balance
1/1/15
$1,000
$500
These may involve several accounts to be debited and only one account to be credited or vice versa.
- Format of Journal Entries
DATE PARTICULARS FOLIO DR CR
Name of account to be debited ×××
Name of account to be credited ×××
Narrations.
Note: It should be noted that any transaction which cannot be entered in the subsidiary books must appear in the journal before being posted to the ledgers.
- Sales and purchases of fixed assets on credit: e.g.
(a) Sold Furniture to Rita on credit N600.00
DATE PARTICULARS DR CR
₦ ₦
Furniture 600
Rita 600
Sales of furniture to Rita
(b) Purchases of Motor Vehicle N5,000.00 from Ali on credit
DATE PARTICULARS DR CR
₦ ₦
Motor Vehicle 5,000.00
Ali 5,000.00
Purchases of Motor Vehicle from Ali
- Use of journal to answer questions on double entry system
Examples:
Paid rent N400.00 for cash
Cash sale N650.00
JOURNAL
DATE PARTICULARS DR CR
₦ ₦
Rent 400
Cash 400
Rent paid with cash
DATE PARTICULARS DR CR
₦ ₦
Cash 650
Sales 650
Being sales of goods for cash
- Opening entries
Example:
Jojo’s book shows the following balances on 1st January, 2013
Assets: Motor Van N800.00, Stock N450.00, Plant and machinery N900.00, Furniture N450.00, Cash N500.00 Debtor N200.00 Bill receivable 550.00
Liabilities: Creditor 1,600.00, Loans 1,400.00 Bill payable 850.00
DATE PARTICULARS DR CR
₦ ₦
Assets:
Motor van 800
Stock 450
Plant and machinery 900
Furniture 450
Cash 500
Debtors 200
Bill receivable 550
Liability:
Creditor 1,600.00
Loans 1,400.00
Bill receivable 850
3,850.00 3,850.00
- Correction of errors
Examples:
Cash sale N300.00 was omitted completely from the books
DATE PARTICULARS DR CR
N N
cash 300
sales 300
correction of cash sales omitted
- Transfer between accounts
Examples:
Bola, a doctor, could not pay N1, 000 owed to us but bought machinery for full settlement.
DATE PARTICULARS DR CR
₦ ₦
Bola 1,000.00
Machinery 1,000.00
Full settlement of debt with
1. What is the format of a journal entry?
2. What are the different types of journal entries?
3. How do you create a journal entry for a cash sale?
4. How do you create a journal entry for an opening balance?
5. How do you adjust a trial balance with a journal entry?
6. What is the purpose of a journal opening entry?
7. How is a journal opening entry different from a regular journal entry?
8. How do you prepare a journal opening entry?
9. What is the purpose of a journal closing entry?
10. How do you prepare a journal closing entry
Conclusion
The subject teacher wraps up or concludes the lesson by giving out short notes to summarize the topic that he or she has just taught.
The class teacher also goes round to make sure that the notes are well copied or well written by the pupils.
He or she makes the necessary corrections when and where the needs arise.
Write five multiple-option questions with one correct answer and three wrong answers on
Write out the answers to the questions on concept and convention in accounting.
