Chapter 7 – Special Transactions: General Journal Entries Learning Outcome This chapter shows how to prepare General Journal entries for special transactions from source documents and other information supplied. Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson

KEY TERMS Adjusting journal entry Bad debt Bad debt recovered Bills of exchange Bills payable Bills receivable Dishonoured cheques Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson

KEY TERMS cont… General journal Interest charged Interest received Narration Opening General journal entry Special transactions Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson

GENERAL JOURNALS Used to record entries that cannot be recorded in the other four journals Must be supported by a narration Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson

GENERAL JOURNALS cont… Records transactions that are NOT: cash sales credit sales cash payments credit purchases returns of goods sold returns of goods purchased discounts allowed discounts received Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson

FORMAT OF GENERAL JOURNAL Date Details Folio Debit Credit 1 2 3 4 5 Shows transaction date Shows details of accounts to be debited and credited Folio column for cross references Debit amount Credit amount Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson

GENERAL JOURNAL TRANSACTIONS Opening entry for commencement of business Record Equity in terms of assets and liabilities at commencement of business Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson

GENERAL JOURNAL TRANSACTIONS cont… Show debit entries before credit entries Must have narration Indent credit entries Debits must equal credits Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson

WRITE OFF BAD DEBTS Debtor is bankrupt Unable to collect debt Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson

INTEREST EXPENSE AND INTEREST RECEIVED Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson

ADJUSTMENTS TO CORRECT ENTRY IN WRONG ACCOUNT Purchase of computer incorrectly posted to office furniture: Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson

DRAWINGS If owner takes stock for personal use, use Purchases account. Drawings account is an Equity account. Debit drawings decreases Equity. Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson

BILLS OF EXCHANGE A means of payment for debtors Used for overseas transactions Used for some activities within Australia Accounts called bills receivable and bills payable used to record transactions Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson

ADVANTAGES OF BILLS OF EXCHANGE Formal recognition of debt owing Written evidence of debt Date set for payment Negotiable instruments—can be transferred to another person Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson