1. Journals Journals are another book of prime entry used to record accounting transactions. It records transactions that do not have any official form of documentation (invoice, credit note or receipt) A journal is used to record the sale of fixed assets, writing off bad debts, correction of errors and entering opening balances to a business.

2. What does a journal look like? The journal entry is a written instruction to process a form of transaction Illustration of journal version 1 DateDetailsDRCR 23 AprilBad Debts/ Irrecoverable debts VAT Kleans Ltd / SLCA 104.67 20.93 125.60 Debt written off as instructed by memo 22/4/ 226GH 30 AprilMotor Expenses Motor Vehicles 84.70 Invoice 3755 posted to motor vehicles account in error Debit entry must be entered first Then the credit entry slightly indented A narrative explaining the purpose of the journal

3. Journal Version 2 Journal no2655 Date23 April Authorised by A Mount AccountReferenceDR £ CR £ Irrecoverable debtsGL800104.67 VATGL20220.93 Sales Ledger Control AccountGL110125.60 Total125.60 Kleans Ltd125.60 Narrative: being the write off of the trade receivables debt Ensure each journal has: Number, date, accounting system code and authorisation

4. Types of accounting errors corrected using a journal. Error of commission Error of principle Error of omission Error of original entry Compensating error Complete reversal of entry

5. Explanations Error of commission A transaction has been posted to the wrong personal account The double entry postings has been posted correctly just the wrong named account Example A sales invoices to H Smith has been posted to G Smith in error Take out of G Smith and post to H Smith

6. Explanation Error of principle A transaction has been posted to the wrong type of account The double entry postings have been posted correctly but to the wrong nominal account Example Purchase of motor vehicle has been posted to purchases Sale of business ‘s fixed asset has been posted to sales

7. Explanation Error of omission Where a transaction has been completely omitted from the books No postings have taken place Usually caused by mislaying a document DD or SO go through the bank but not through the cash book Drawings – owner takes cash and good for own personal use

8. Explanation Error of original entry Miscalculation of transaction (undercast ing / overcasting totals) or Copying the information incorrectly on both parts of the double entry Example Overcasting a column of figures in the day book Entering a transaction for £368 as £386

9. Explanation Compensating error Here the errors may not be related but they equal the same value on both the debit and credit side of the trial balance These errors can cancel each other out

10. Explanation Complete reversal of entries A transaction has been posted on the wrong side of the account A debit entry has been posted on the credit side of the account and the credit side of the transaction has been posted to the debit side Example Supplier payment has been posted on the debit side of the cash book and credit side of the suppliers account

11. Journal posting not effecting the trial balance If both sides of the transaction have been posted it should not effect the trial balance but may take a while before the errors are discovered. On discovery, a journal is generated and from that the double entry posting can be processed.

12. Suspense account Where the trial balance does not agree and differences cannot be found immediately the difference between the debit values and credit values are posted to a suspense account. Bank10276 Capital36200 95,00094,800 Suspense200 95,000

13. The difference is posted to the lesser side (DR/CR) to achieve equal values on the TB After investigation any errors found will be corrected using journals, taking error values from the suspense account and posting to the correct nominal account Where error can not be found the suspense value is shown in the balance sheet as Credit balance value in Suspense account- shown as current liabilities Debit balance value in Suspense account – shown as current asset