1.0
INTRODUCTION
In practice, it would
be extremely difficult and in many cases quite impracticable to make the two
ledger entries for a transaction immediately it occurs, because of the large
number of accounts that have to be kept. As a general rule, the clerk
responsible for the debits in respect of certain transactions is not always
responsible for the credits. Another clerk is responsible for these, so that
there is a check upon the work of clerk. The debit made by one must agree in
total with the credits made by the other.
This division of the
work of ledger posting further increases the difficulty of making ledger
entries for a transaction immediately it occurs. It is, therefore, found to be
convenient to enter the transactions in a Journal when they occur, and to post
the ledgers from the Journal later.
2.0
OBJECTIVES
At the end of this note,
you should be able to:
• explain the Primary
uses of journal
• explain the uses of
subsidiary books of account
• explain the
secondary uses of the journal.
3.0
MAIN CONTENT
3.1
Journal - Uses of Journal
3.2
Primary Uses of Journal
In practice all
transactions are first entered in the journal in the order in which they occur
and from the journal they are posted to the respective accounts in the ledger.
But this would involved a tremendous amount of work because each transaction
requires a separate debit to the receiving account and a credit to the giving
account to bring into record the two fold aspect of each transaction. A
considerable saving of clerical labour's effort can be brought about if
transactions of similar nature are recorded in separate journals so as to
permit the sub-divisions of the journals. This would facilitate not only the
division of the journal but it would also make easier the job of posting in the
ledger, as the postings can then be made in the form of totals being
transactions of similar nature.
These sub-divisions
of the journals into various books recording transactions of similar nature are
called subsidiary books. These subsidiary books are also known as books of
original entry because transactions are first recorded in these books to be
subsequently transferred to their respective accounts in the ledger.
In the last note, we
mentioned the types of subsidiary books and their uses. For more explanation,
the various books in which the journal may be subdivided into are as follows:
1. Cash- book or cash
journal. This book can be used to record cash receipt and payments
Note that the cash
book is a journal as well as a ledger.
2. Purchases day book
or bought book or invoice book. It can be used for recording credit purchases
of goods.
3. Sales day book.
This can be used for recording all goods sold on credit
4. Purchases Returns
book or Returns outwards book for recording all purchases returned to
creditors.
5. Sales Returns book
or Return inwards book for recording all sales returned by customers.
6. Bills receivable
book used to keep a record of bills received from.64
customers.
7. Bills payable book
used to keep a record of bill payable to creditors.
8. Journal proper
used to keep a record of those transactions for which there is no separate
book.
3.3
Secondary Uses of Journal
In modern practice
the journal proper is used only for recording transactions which cannot
conveniently be passed through other books or original entry already discussed
under the primary uses of journal.
These include:
1. Opening entries
2. Closing entries
3. Entries relating
to rectification of errors i.e. correction of errors.
4. Adjustment in
account
5. Purchase and sales
of fixed assets on credits
6. Transfer entries
{transfer from one account to another}. e.t.c.
3.3.1
Opening Entries
If a trader commences
business with various assets and perhaps liabilities or whether, for any reason
a new set of books is being opened, the opening balances are usually
journalized. The capital of the business is the excess of Assets over
liabilities of such business at any date. If the business has no liabilities
then the value of all the assets will be the capital of the business.
After ascertaining
the capital in this way, Journal entries are made to show these assets,
liabilities and capital at that date before the item are posted to the ledger.
Illustration:
On March 1st, 2000,
the financial position of Tom Jones and Sons was as follows:
N
Cash Balance 200 =
Bank Balance 15,000 =
Stock 7,500 =
Furniture 5,200 =
Debtors – Alhaji Musa
1,500 =
Mr.
J. Okoro 2,000 =
Creditors Cooperative
Bank Plc. 1,800 =
1st Bank Plc 10,000 =
You are required to show journal entries
necessary to open the books
3.3.2
Closing Entries
At the end of the
trading period of any business, there is bound to be closing stock or stock to
end, if the goods purchased are not sold. In order not to overstate the loss or
understate the profit, it is important to take the value of stock not sold into
account. It should be noted that closing stock does not appear in the trial
balance because the entries in respect of this stock are not made until the
final account are prepared, which is after the trial balance is prepared.
In order to bring the
value of stock into account, it is usually passed through the journal.
Illustration:
A. Closing entry for
trading Account. The journal entries necessary to transfer opening stock,
purchases, sales and Returns to the trading account are called closing entries,
as they serve to close these accounts — These are as follows:
1. For transfer of opening stock. Net
purchases and direct expenses to Trading Account.
3.3.3
Other Examples
Other examples of
secondary uses of journal will be discussed in the subsequent notes. i.e
I. Ractification of
errors {correction of errors}
II. Adjustments e.t.c
4.0
CONCLUSION
In practice, all
transactions are first passed through the journal so as to provide a suitable
record from which the ledger entries can be made at some later and more
convenient point of time.
The journal serves a
number of useful purposes in Accounting.
5.0
SUMMARY
In this note, we
discussed the primary uses and secondary uses of journal. In practice, it would
be extremely difficult and in many cases quite impracticable to make the two
ledger entries for a transaction immediately it occurs because of the large
number of account that have to be kept. So to facilitate the posting of ledger
account at a later and more convenient time, all transactions are first entered
in the journal, being a book of original entries.
0 comments:
Post a Comment