Grade 10 to 12

TEACHER DEVELOPMENT

Subject: Accounting

General Journal

Presented by: Mrs Maritha van Niekerk

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General Journal (GJ)

• The General Journal (GJ) is used to record all transactions that do not belong in any other of the Journals.
• This includes transactions that do not occur frequently and do not justify a specific journal.
• The entry made in the GJ shows the account debited, the account credited and a narration.

• The journal is adapted to cater for transactions with debtors and creditors. Separate columns are allocated for the debtors and creditors.
• The source document for the GJ is a JOURNAL VOUCHER.
• Posting to the GJ is done daily to the General Ledger EXCEPT for the Control Accounts. The totals for the Debtor’s and Creditor’s Control accounts are posted at month-end.

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• Transactions that are entered in the GJ:
• Bad debts
• Withdrawals of merchandise / other non-cash items by the owner.
• Interest on overdue accounts.
• Capitalisation of interest.
• Correction of errors.
• Transfer of balances between Debtor’s Ledger account and Creditor’s Ledger account.
• Year-end adjustments.
• Closing transfers and reversal entries.

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Layout of the General Journal

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1. Journal Voucher number issued.
2. Date on which the transaction takes place.
3. The details column shows the Account to be debited and the Account to be credited. The Account to be debited is recorded FIRST and the account credited is recorded below the account debited. The account credited is indented (space / slightly more to the right than the account debited)
4. The folio column shows the folio reference of the account affected. Assets, Liabilities and Owners Equity accounts = B (balance sheet accounts section). Income and expense accounts = N (nominal accounts section) and when a debtor or creditor is involved the debtors or creditors ledger needs to be referenced = DL /CL.
5. These columns show the debit and credit amount for the accounts involved.
6. The Debtors Control Column shows any amounts that affect the Debtors Control Account.
7. The Creditors Control Column shows any amounts that affect the Creditors Control Account.
8. A narration – a brief explanation of the transaction is recorded below the accounts.

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Journal entry

It indicates which account must be debited and which account credited.

Narrations

There must be a short explanation of the transaction, called a journal narration. It is written as explanation for each transaction. This is necessary for the variety of transactions which are recorded and for control and audit purposes.

Source document

A Journal voucher which is authorised by a senior staff member.

SUMMARY:

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Focus on corrections of errors and transfer of accounts:

Example 1:

The roof has been repaired at a cost of R2 300. This has been posted to the Land and Buildings account

STEP 1:

Determine which account should have been affected

Repairs

STEP 2:

Determine the incorrect account

Land and buildings

(to be eliminated)

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STEP 3:

• Classify these accounts

Repairs (Expense)

Land and buildings (Asset)

STEP 4:

• Use the DEAD and CLIC rule to determine the debit and credit entries.

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• Repairs ( Expense) (Debit)

• Land and buildings (Asset) (Debit), HOWEVER, this account was entered in error, therefor the Asset must be eliminated/decreased/credited.

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STEP 5: NOT APPLICABLE FOR THIS EXAMPLE

• Tip: If the account is not a person or a business, then it is neither a debtor nor a creditor.

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Correction of error

31

Repairs

Land and Buildings

2 300

2 300

FOL

N

B

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Example 2:

Stationery worth R560 was posted to the Trading stock account in error.

STEP 1:

• Determine which account should have been affected.

Stationery

STEP 2:

• Determine the incorrect account.

Trading stock (to be eliminated)

STEP 3:

• Classify these accounts.

Stationery (Expense)

Trading stock (Asset)

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STEP 4:

• Use the DEAD and CLIC rule to determine the debit and credit entries.

• Stationery (Expense) (Debit)

• Trading stock (Asset) (Debit), HOWEVER, this account was entered in error on the debit side, therefor, the Asset must be eliminated/decreased/credited.

STEP 5: NOT APPLICABLE FOR THIS EXAMPLE

• Enter in the debtor’s and/or creditor’s columns, if applicable.

• Tip: If the account is not a person or a business, then it is neither a debtor nor a creditor.

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31

Stationery

Trading stock

Correction of error

560

560

ALTERNATIVE REASONING:

• Stationery was purchased, so this account should have been entered on the debit side.

• Automatically then the other account (trading stock) will be credited.

FOL

N

B

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EXAMPLE 3:

Goods bought on credit from AB Suppliers for R600 had been entered by mistake into the account of AB Wholesalers a debtor. Correct the error.

STEP 1:

• Determine which account should have been affected.

STEP 2:

• Determine the incorrect account.

AB Wholesalers (to be eliminated)

AB Suppliers

STEP 3:

• Classify these accounts.

AB Wholesalers (Asset)

AB Suppliers ( Liability)

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STEP 4:

• Use the DEAD and CLIC rule to determine the debit and credit entries.

• AB Suppliers (Liability) (Credit)

• AB Wholesalers (Asset) (Debit), HOWEVER, this account was entered in error on the credit side, therefor, the Asset must be increased/debited.

STEP 5: APPLICABLE FOR THIS EXAMPLE

• Enter in the debtor’s and/or creditor’s columns, if applicable.

• Tip: If the account is a person or a business, then it is either a debtor or a creditor.

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31

AB Wholesalers

AB Suppliers

Correction of error

600

600

600

600

ALTERNATIVE REASONING:

Determine who we bought from

• Goods bought on credit from AB Suppliers for R600- account to be credited.

• Automatically then the other account (AB Wholesalers ) will be debited.

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EXAMPLE 4:

The debit balance of R800 for creditor Terry Buhle, must be transferred to his account in the debtor’s ledger

STEP 1:

• Determine what the balance is before the change.

STEP 2:

• Eliminate this account, by entering on the opposite side.

STEP 3:

• Determine the other account.

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STEP 4: NOT APPLICABLE FOR THIS EXAMPLE

STEP 5: APPLICABLE FOR THIS EXAMPLE

• Enter in the debtor’s and creditor’s columns

• Tip: If the account is a person or a business, then it is either a debtor or a creditor.

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31

Terry Buhle

Terry Buhle

Transfer from creditor’s list to debtor’s list

800

800

800

800

ALTERNATIVE REASONING:

Determine what the balance is and in which control account (debtor or creditor)

• The debit balance of R800 for creditor Terry Buhle, must be transferred to his account in the debtor’s ledger.

• Meaning the creditor’s control must be credited.

• Automatically the debtor’s control account must be debited.

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EXAMPLE 5:

The debit balance of R700 for debtor Percy Allows, must be transferred to his account in the creditor’s ledger.

​

STEP 1:

• Determine what the balance is before the change.

STEP 2:

• Eliminate this account, by entering on the opposite side.

STEP 3:

• Determine the other account.

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STEP 4: NOT APPLICABLE FOR THIS EXAMPLE

STEP 5: APPLICABLE FOR THIS EXAMPLE

• Enter in the debtor’s and creditor’s columns

• Tip: If the account is a person or a business, then it is either a debtor or a creditor.

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31

Percy Allows

Percy Allows

Transfer from debtor’s list to creditor’s list

700

700

700

700

ALTERNATIVE REASONING:

Determine what the balance is and in which control account (debtor or creditor)

• The debit balance of R700 for debtor Percy Allows, must be transferred to his account in the creditor’s ledger.

• Meaning the debtor’s control must be credited.

• Automatically the creditor’s control account must be debited.

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