Any transaction can be recorded in the form of a journal. Indeed, in a computerised system, it is probably the easiest way to think of how transactions are recorded and processed in the general ledger. In this context, a journal is the recording of a transaction using the principles of double-entry bookkeeping. Examples of the double-entry required to record transactions are as follows:
Cash sale
Credit purchase
Insurance of premises
Irrecoverable debt written off
The recording of non-routine transactions and the correction of errors in the general ledger can also be presented as journal entries to note the accounting entries required for situations such as the following:
Journals are a clear way of setting out the required double-entry to record a transaction or adjustment in the general ledger. The use of joumals is illustrated as you progress through this study text. Note that, in the ACCA FA1 exam, you may be required to identify or prepare the journal entry for a transaction. It is a method of testing your knowledge and understanding of double-entry bookkeeping in an examination setting, such as those illustrated at the beginning of this section.
An example of a journal transaction is presented below:
| Date | 19/08/X3 | $ | |
|---|---|---|---|
| Journal No. | General Ledger Code Ref | ||
| Debit | Irrecoverable debts written off | 4231 | 3,000 |
| Credit | Receivables | 7583 | 3,000 |
| To write off the amount due from DFG Co which is subject to insolvency proceedings. | |||
| Initiator: WE | Authorised: JR | Receivables' ledger account ref | DFG01 |
This clearly states the double-entry required, the monetary amount plus, for reference, a brief explanation or cross reference to other documents evidencing the reason for the transaction. As illustrated here, the journal document may also include references to identify the initiator of the transaction and the person approving or authorising the processing of the transaction. The presentation of the accounting entries required to record transactions is covered throughout this study text.
The document may not be for a single transaction as illustrated above, it could be a document that supports the posting of multiple transactions, such as all receipts from credit customers received and banked during the day. In this situation, along with the general ledger account references, there will be multiple coding references to e.g. the receivables' ledger records of individual credit customers.
State the journals required to record the following transactions in the general ledger:
For a suggested answer, see the 'Answers' section at the end of the book.