1. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.1 Chapter 17 The journal

2. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.2 Learning objectives After you have studied this chapter, you should be able to:  Explain the purpose of having a journal  Enter up the journal  Post from the journal to the ledgers  Complete opening entries of a new set of accounting books in the journal and make the appropriate entries in the ledgers  Describe and explain the accounting cycle

3. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.3 The journal  The journal is a form of diary to record unusual transactions before they are posted in the double entry accounts.  A journal entry contains: The date The account to be debited and the amount The account to be credited and the amount An explanation of the transaction A folio reference to the source documents

4. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.4 Typical uses of the journal  The purchase and sale of fixed assets.  Writing-off bad debts.  The correction of errors in the ledger accounts.  Opening entries to open a new set of books.  Adjustments to any of the entries in the ledgers.

5. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.5 A journal page

6. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.6 Purchase and sale on credit of non-current assets A milling machine is bought on credit from Toolmakers Ltd for £10,550 on 1 July 2012.

7. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.7 Purchase and sale on credit of non-current assets (Continued)

8. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.8 Purchase and sale on credit of non-current assets (Continued) Sale of van no longer required for £800 on credit to K. Lamb on 2 July 2012.

9. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.9 Purchase and sale on credit of non-current assets (Continued)

10. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.10 Bad debts A debt of £78 owing to us from H. Mander is written off as a bad debt on 31 August 2012.

11. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.11 Bad debts (Continued)

12. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.12 Correction of errors J. Brew, after being in business for some years without keeping proper records, now decides to keep a double entry set of books. On 1 July 2012 he establishes that his assets and liabilities are as follows

13. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.13 Correction of errors (Continued) Assets Van – £3,700 Fixtures – £1,800 Inventory – £4,200 Accounts receivable: B. Young – £95 D. Blake – £45 Bank – £860 Cash – £65 Liabilities Accounts payable: M. Quinn – £129 C. Walters – £410

14. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.14 Correction of errors (Continued)

15. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.15 Correction of errors (Continued)

16. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.16 Adjustments to any of the entries in the ledgers K. Young, a debtor, owed £2,000 on 1 July 2013. He was unable to pay his account in cash, but offers a 5-year-old car in full settlement of the debit. The offer is accepted on 5 July 2013.

17. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.17 Adjustments to any of the entries in the ledgers (Continued)

18. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.18 Adjustments to any of the entries in the ledgers (Continued) T. Jones is a creditor. On 10 July 2013 his business is taken over by A. Lee to whom the debt of £150 is now to be paid.

19. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.19 Adjustments to any of the entries in the ledgers (Continued)

20. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.20 Adjustments to any of the entries in the ledgers (Continued) We had not yet paid for an office printer we bought on credit for £310 because it was not working properly when installed. On 12 July 2013 we returned it to the supplier, RS Ltd. An allowance of £310 was offered by the supplier and accepted. As a result, we no longer owe the supplier anything for the printer.

21. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.21 Adjustments to any of the entries in the ledgers (Continued)

22. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.22 The accounting cycle for a profit-making organisation

23. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.23 Learning outcomes You should now have learnt: 1. What the journal is used for 2. That the journal is the collection place for items that do not pass fully through the other five books of original entry 3. That there is a range of possible types of transactions that must be entered in the journal

24. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.24 Learning outcomes (Continued) 4. That the opening double entries made on starting a set of books for the first time are done using the journal 5. How to make the opening entries for a new set of books in the journal and in the ledger accounts

25. Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 17.25 Learning outcomes (Continued) 6. That the main parts of the accounting cycle are as follows: a. Collect source documents b. Enter transactions in the books of original entry c. Post to ledgers d. Extract trial balance e. Prepare the income statement f.Draw up the statement of financial position