Opening Entries

CONTENTS :

1. Opening Journal entries
2. Recording of subsequent financial transactions

When a business begins the capital will consist of cash, money in the bank and other assets. To record this event, a set of books must be opened. Also, on deciding to keep his books on double entry principle or on opening a new set of books the trader will record what is known as opening entries. For the three cases identified above, the General Journal (or Principal Journal or Journal Proper) is used to record the opening entries.

  The trader will summarise his financial position. This summary will disclose that he has certain assets, valuable possessions and properties which is to be used in the business. In addition certain sums of money may be owing to him by customers, while, on the other hand, he may owe various sums. The latter are his liabilities, and, taking the total of these from his assets, he is able to say what he is worth financially. That amount by which his assets exceed his liabilities is called his capital.

  The summary as described above is recorded in the General Journal and is known as the opening entries.

The entries in the ledger accounts are usually described in the narration column as ‘balance’ as they usually represent the balances of accounts brought down from the previous period.

        These items having been posted, the books are ready for the subsequent transactions to be entered as and when they occur. In examination tests, students may be required to prepare the opening entries and also record the subsequent transactions. The procedure described above will then have to be done before the transactions are recorded.

EVALUATION

1. Simplified and Amplified Financial Accounting Exercise 3X and 7X

READING ASSIGNMENT

1. Business Accounting 1. Page 232 – 239
2. Simplified and Amplified Financial Accounting.  Page 127 – 133

GENERAL EVALUATION QUESTIONS

1. Business Accounting 1. Exercise 25.1 and  25.2A
2. Simplified and Amplified Financial Accounting. Exercise 5, 6 and 8X

                                                   WEEKEND ASSIGNMENT

1. Which of the following accounts belong to the purchases ledger (a) bank (b) creditors (c) salaries (d) debtors
2. The statement which shows the financial position of a business at a given point in time is (a) trial balance (b) cash book (c) bank statement (d) balance sheet
3. The drawings account of a sole trader is transferred to the (a) trading account (b) profit and loss account (c) capital account (d) discounts account
4. The salary of a shopkeeper who sell goods would be charged in the (a) Balance Sheet (b) Sales Account (c) Trading Account (d) Profit and Loss Account
5. Capital is the (a) money owed by a business to others (b) money owed to a business by others (c) liability of the business to its proprietor (d) total of the long – term liabilities.

                                                     THEORY

1. a.  What is a Journal Proper

b.   Enumerate eight uses of the Principal Journal

• Explain four differences between a trial balance and a balance sheet.