Journals

Meaning of Journal

A journal is a document which contains the daily records of business transactions. Each record in a journal is called an entry. The journal is called a book of original entry because its entries are transferred to a second book.

Format of a Journal

Types of Journal

We have two major divisions of Journals: General Journal and Special Journal

General Journal

This is a book that records all transactions (both sales and purchases). It is also used to correct errors made in the books of account. It is used when no special journal exists. It can also be called The Journal.

Format of a General Journal

Special Journal

It is used to record only one type of entry. Types of Special Journals are listed below:

1. Purchases Journal
2. Sales Journal
3. Return Inward Journal
4. Return Outward Journal

In order to keep the general ledger free from unnecessary details, separate journals are kept for credit transactions concerning sales and purchases.

Let’s take each of them one after the other.

Purchase Day Book or Purchases Journal

This is also known as the bought Journal. It is used to record all daily particulars of goods bought for resale on credit. It is maintained exclusively for credit purchases of goods meant for resale. Entries are made in the purchase journal from the purchase invoices issued by the sellers.

Preparation of Purchase Journal

Debit purchase account with the total amount of purchases for the period. Credit the individual seller’s (creditor) account with the net amount.

Example:

Enter these transactions in the purchase journal of Oke & sons for the month of June 2000, and post this to the ledger,

June 15 Ekpe & Co.: Invoice No. 102

15 Dozens of Eraser at 250k a dozen

30 Rulers at 50k each

40 Writing pad at 10k each

200 Envelopes at 15k per 25

Invoice subject to 10% trade discount

June 16 Bought from Ayi Effiom Bookshop invoice No. 37

10 Reams of foolscap at N350 per ream

6 Dozen Exercise books at N12 a dozen

21 B. Allegro, invoice No. ACP 134 N6,500

Subject to 20% trade discount

Oke & Sons

Purchases Journal for the month of June, 2000

Sales Journal

This is one of the books of original entry. It is used to record daily sales of goods on credit. The recording of transactions into sales journals is the same as purchase journal except in posting to the ledger. In the ledger, debtors (customers) personal accounts are debited and sales accounts credited in the general ledger with the total amount of credits sales for the period.

Example:

Aneke venture is a dealer is cloth materials. Enter the transaction below in his sales day book.

November 2, 2000

Sold to Ibete $ Sons and issued invoice No. 163

200  Meters of Nylon material at N150 a metre

180  Meters of Silk material at N120 a metre

160  Meters of Travara material at N170 a metre

Invoice is subject to 5% trade discount

November 18, 2000

Sold to Ada & Sons invoice No. 46

7  Nylon shirts at N550 each

11 Singlets at N140 each

2  Dozens handkerchiefs at N115 each

Anieke Venture

Sales Day Book for the Month

EVALUATION

1. What do you understand by the term Purchase day book and Sales day book?
2. What is the purpose of each journal?

Returns Outward Day Book and Returns Inward Day Book

Returns Outward Day Book

This day book is also called Returns outward Journal or purchases return book. It is used for recording all goods returned to the sellers and allowances granted by them. Entries are made from the credits notes received from the seller. The total amount of the returns and allowances for a period are credited to the returns outwards account in one figure in the ledger while individual items are debited to the personal accounts sellers in the purchase ledger.

Example:

The following returns were made to sellers on the dates shown. Record them in the returns outwards journal.

Oct. 5 Returned 1 carbon of biscuit at N250 to B. Ekpe, Credit Note No. 02/13

Oct. 6 Returned to R. Igwe Note No. 02/44 N500

Oct. 8 Received a note from Obongha & Sons on goods returned, Note No.27 N450

Returns Inward Day Book

This is also known as sales return book or Returns inward Journal. It is used for recording the particulars of all goods returned by customers and the allowance granted to them. The source document for returns inwards journals is the credit note prepared by the seller who is accepting the goods returned.

Example:

The following returns were made by Ibete & Co customer on the date specified. Record the transactions into the returns inwards journal.

EVALUATION

1. Explain the term Return Outward Day Book
2. What is the purpose of Returns Inward Journal?
3. From the following particulars, prepare purchases day book of Eteng & Co.

Jan. 5  

Bought goods from Arikpo and Sons

3 Cartons of Biscuit at N450 a carton

2 cartons of Jumbo matches at N350 a carton

The invoice is subject to 5% discount

Jan. 8

Received invoice No. 11 from Abuo Enterprises.

4 dozens of 40 leaves exercise books at N600 a dozen

100 erasers at 5 for N2

20 rulers at N4 each

4. Credit sales were made to the under mentioned customers. Record the transaction in the sales journals.

5. A Credit note was received from Onete Ukam by E. Ina. Below is the credit note No. 102:

You are required to prepare returns outward journal.

6. Record the following transactions into the returns inward journal.