Mada za sehemu hiiAdjustmentsMada 6
- Concept of Adjustments
- Capital Expenditure and Revenue Expenditure
- Depreciation of Non-Current Assets
- Disposal of Non- Current Assets
- Bad debts and Provisions
- Preparation of comprehensive financial statements
Introduction
Journalizing in bookkeeping is the system by which all business transactions are recorded for your financial records. A business transaction is first recorded in a journal, also called a Book of Original Entry or Prime entry. Your journal keeps a record of all your business transactions, tracking them in chronological order, as they happen.
Adding new journal entries is called journalizing. The process of journalizing starts whenever a business transaction occurs.
Let's say your client pays an invoice. You'd want to record that payment as a journal entry to log the transaction. Each journal entry typically records the date, the account you're debiting or crediting and a brief description of the transaction that occurred.
Transactions which are related to the sales and purchase or return of goods are entered into their specific journals. Also, the General journal is used for recording transactions which, owing to their nature, cannot be entered in any other book of prime entry.
Examples of such transactions are:
- Credit purchases and sales of fixed assets.
- Opening and closing entries
- Adjustments
- Correction of error
- Introduction of capital.
Note:
- The General journal is also called journal proper.
- Only purchases and sales of fixed assets on credit are recorded in the general journal and not on cash because cash sales and purchases of fixed assets are recorded in the cash book.
The transactions entered into your journals are later transferred to your general ledger. So what's the difference between a journal and a general ledger?
Think of journals as records that show all the financial details of your business. A general ledger, on the other hand, is a master document that offers less detail. Instead, it gives a big-picture view of your financials.
The narrations in the General Journal are brief explanations of a transaction for future reference which are put after each entry in the journal.
i. Classify business transaction by account: Take a look at each business transaction and classify it by the type of transaction. There will be two types of accounts involved in each transaction: one account will be debited and one account will be credited.
ii. Determine the account type that's involved: There are different types of accounts that can be included in a journal entry, and it's important to identify the correct account type when using double-entry bookkeeping. The types of accounts normally used include asset, liability, expense and revenue.
iii. Apply the fundamental accounting equation to the transaction: Remember the essential fact of the basic accounting equation: your financial transactions must always be balanced, with the sum of your debits always equal to the sum of your credits. So you'll want to ensure that every time you debit one account, you credit the corresponding account.
iv. Journalize the transaction: To complete the process, you'll want to record the business transaction as a journal entry in the correct journal. Don't forget to include the date of the transaction and a brief description of the financial event you're recording. The name of the account to be credited is entered on the line below the debit entry and is indented, which is placed about one inch to the right of the date column.
i. The Journal shows all information about a transaction in one place and provides an explanation of the transaction.
ii. The Journal provides a chronological record of all events in the life of a business.
iii. The use of a journal helps to prevent errors, if transactions were recorded directly in the ledger, it would be very easy to make errors such as omitting the debit or the credit or entering the debit twice.
The General journal is used to record the following
- Purchase and sales of fixed assets on credit
- Opening and closing entries
- Correction of errors
- Used to record bad debts written off.
- Miscellaneous things that cannot be recorded in other journals
Record the following transaction in the General journal of Massawe
June 2. Bought a motor vehicle on credit from Beforward worth Tshs 5,000,000.
June 8. Sold furniture on credit to Khan Brother Tshs 350,000.
June 14. Bought office equipment from Amazon dealers for Tshs 100,000.
June 18. Bought a motor vehicle from Kitufe motors for 7,000,000 and paid half the amount in cash.
| Date | Particulars | Dr | Cr |
|---|---|---|---|
| June 2 | Motorvehicle Be forward Purchase a motor vehicle with Invoice no. | 5,000,000 | 5,000,000 |
| June 8 | Khan Brothers Furniture Sales of furniture on credit | 350,000 | 350,000 |
| June 14 | Office Equipment Amazon dealers Credit purchase of office equipment | 100,000 | 100,000 |
| June 18 | Purchases Cash at Bank Kitufe Credit purchase of motor vehicle paying half the amount by cash | 7,000,000 | 3,500,000 3,500,000 |
| 12,450,000 | 12,450,000 |
Bestina had the following Assets and liabilities on 1st April 2021
Assets: Land 20,000,000
Building 80,000,000
Cash 50,000,000
Liabilities: Creditors 10,000,000
Loan from equity 30,000,000
Loan from CRDB 20,000,000
Required: Open General Journal and calculate the amount of capital.
| Date | Particulars | Dr | Cr |
|---|---|---|---|
| April | Cash Land Building To Creditors Loan from equity Loan from CRDB Capital | 50,000,000 20,000,000 80,000,000 | 10,000,000 30,000,000 20,000,000 70,000,000 |
| 150,000,000 | 150,000,000 |
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