The Journal Proper
At least one further subsidiary book, sometimes called simply “the journal”, is essential for the operation of any efficient accounting system. The purpose of the journal is to record those entries which can not be made in the main books of original entry, such as the following:
a. Opening entries
To record initial assets, liabilities and capital taken over by a new business.
In a amalgamation, to incorporate the assets and liabilities of the undertakings absorbed.
b. Transfer between one account and another
Where, for example, an entry has been made in the wrong account; an item has been charged to expenditure or revenue account instead of to capital; the writing-off of bad debts, i.e. transfer from the customer’s account to a ” bad debts’ account; transfer of profit to reserve or owners’ accounts, etc.
c. Closing entries
When business is dissolved
To adjust accounts at the year end or other balancing period, e.g. the transfer of balances from the revenue accounts to the trading and profit and loss accounts; and various other end-of-period adjustments.
d. Other entries
Where an analysed purchase day book is not kept it will be necessary to record liabilities, such as capital items obtained on credit, in the journal.
Other entries, such as infrequent bill transactions, where it is considered unnecessary to maintain a special day book for the purpose.
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