The Accounting Information System - Journals Flashcards
See Textbook
Where are all business transactions first recorded in?
Journals
What is a journal like?
A diary.
What does the journal do?
It records all the business transactions in chronological order, i.e. sorted by date / in order of date. It records all the business transactions that happened during the day, the week and so on.
Are different journals used for different transactions?
Yes.
Name the three main types of journals that I must know.
Special Journals
Cash Book
General Journal
List the four types of special journals.
- Purchases Journal 2. Purchases Returns Journal 3. Sales Journal 4. Sales Returns Journal
What is the purpose of the Purchases Journal?
To record all credit purchases of goods.
What are the related source documents that are used for recording the transactions in the Purchases Journal?
Original invoices from the suppliers.
What is the purpose of the Purchases Returns Journal?
To record all return of goods bought on credit.
What are the related source documents that are used for recording purchases returns transactions in the Purchases Returns Journal?
Original credit notes from the suppliers.
What is the purpose of the Sales Journal?
To record all credit sales of goods.
What are the related source documents that are used for recording all credit sales of goods in the Sales Journal?
Copy of invoices sent to the customers.
What is the purpose of the Sales Returns Journal?
To record all return of goods sold on credit.
What are the related source documents that are used for recording sales returns transactions in the Sales Returns Journal?
Copy of credit notes sent to the suppliers.
What is the purpose / role of the Cash Book?
To record all cash and cheques received and paid out, i.e. to record all cash transactions.
Name the source documents used when cash and cheques are received.
Copy of receipts issued to customers. Remittance advice from credit customers Bank Statements.
Name the source documents used when cash and cheques are paid.
Payment vouchers
Cheques
Original receipts from suppliers
Bank statements
What is the purpose of the General Journal?
To record all other transactions not recorded in the Cash Book and Special Journals. Note that the source documents used depends on the transactions.
What is the General Journal?
It is an all-purpose journal, and is used to record transactions that cannot be recorded in the Special Journals and Cash Book.
List the items that are usually recorded in the General Journal.
- To record the non-cash assets contributed by the owner and non-cash assets taken by the owner as drawings. Example: when the owner contributes a motor vehicle for business use or when he takes away inventory for his own / personal / private use. 2. To record assets and any liabilities that the sole proprietor / owner brings into the business when the business is first set up. Chapter 19
List another item that is usually recorded in the General Journal.
- Purchases and sales of non-current assets, e.g. property, plant and equipment, land, office equipment, fixtures and fittings, motor vehicles. Chapter 13
List another item that is usually recorded in the General Journal.
- To write off uncollectible debts. Chapter 14
List another item that is usually recorded in the General Journal.
- To record dividends when they are declared.
List another item that is usually recorded in the General Journal.
- To record adjusting entries at the end of the financial period.
What is the purpose of making adjusting entries?
To ensure that income and expenses are correct. Chapters 11, 13 and 14
List the types of adjusting entries.
- Prepayments, accruals, income received in advance and income receivables. 2. Depreciation of non-current assets. 3. Allowance for impairment of trade receivables.
List another item that is usually recorded in the General Journal.
To correct accounting errors. Example: a cash sale of $30 was recorded as $300. The correction is made in the General Journal.
List another item that is usually recorded in the General Journal.
To transfer the profit or loss from the profit and loss account to the capital or retained earnings accounts.
To transfer the drawings to the capital account. Chapter 19: Business Entities
List another item that is usually recorded in the General Journal.
To record closing entries. At the end of the financial period, all income and expenses accounts are closed off to the trading or profit and loss accounts. Chapter 9: Income Statements.
How are business transactions recorded in the General Journal?
In chronological order / in order of date.
What does each journal entry include?
A narration, i.e. a brief / short description or explanation of the transaction.
What is the use of the narration?
To help the accountant recall the background of each transaction without having to refer to source documents.
What is the entry format for the General Journal?
See textbook or
http://dineshbakshi.com/igcse-gcse-accounting/source-and-recording-of-data/revision-notes/1537-types-of-journals
What is the limitation of the journals?
A business may have thousands of business transactions recorded in the journals. If the business wants to know how much it owes a particular supplier, the total amount owed by a credit customer or the total amount of goods bought in a month, it is difficult to go through all the records in the journals to gather the information.
Explain the purpose of the general journal.
To record the following:
- opening entries
- closing entries
- purchase and sale of fixed assets on credit
- correction of errors, adjustments and transactions not recorded in other subsidiary books.
