General Journal Flashcards
General journal
An accounting record used to record infrequent non cash transactions which cannot be recorded in the special journals.
Narrations
A brief description of a transaction recorded in the general journal, including a reference to the relevant source document.
Commencing entry
A general journal entry to establish double entry records by entering existing asset, liability and owners equity balances in the ledger account. This is used when the business is starting and the owner is contributing starting capital or when the owner decides to switch from single entry accounting to double entry records.
Non cash transactions with the owner
Cash drawings will be recorded in the CPJ.
Cash contributions will be recorded in the CRJ.
Drawings or capital contributions of other non-cash items (stock or equipment) will be recorded in the General journal.
Bad debts
An expense incurred when a debt is written off because it is deemed to be irrecoverable.
According to conservatism principle, a bed debt should be recognised as an expense when the loss is probable, so that assets (debtors control) are not overstated.
Recognising a bad debt will ensure the reports contain all the relevant information that is useful for decision making such as bad debts in the income statement and an updated amount for debtors control in the balance sheet.
Justify why discount expense is an expense
Discount expense is an expense as it is a reduction in inflows of economic benefits. When a discount is granted to a debtor, less cash is received by the business. The discount causes a decrease in the asset debtors control and leads to a decrease in owners equity as profit is decreased by the increase in discount expense.
Correcting entries
Arises when a business is able to identify that a previous entry in another journal was incorrect. The General journal is used to correct the error.
Step 1 Identify what the correct entry should have been
2 Identify what entry was made
3 Correct the error
