May 28, 2022

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KEEPING A GENERAL JOURNAL FOR SMEs

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KEEPING A GENERAL JOURNAL FOR SMEs

For most small businesses, it is better to keep records of transactions in a general journal than to keep piles of records in the ledger. General journals are more economical for small business.

A general journal is a journal that records transactions in a chronological manner, the day-to-day business transactions.

Also, the general journal is used to record transactions that do not fit into other subsidiary books as explained in the previous article (how to keep a financial transactions for small  business).

 The information to recorded in the general journal about each transaction includes:

 The date of the transaction

The debit and credit changes in specific ledger accounts

 The narration. The narration is shows the purpose and authority of the transaction.

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 Uses of the General Journal

General journal is used for the following purposes

Opening entries

Closing entries

Transfer from one account to the other

Purchases and sales of non-current assets on credit.

End of period adjustment

Correction of errors

The general Journal looks like these

Date                                   Particulars                              Folio                  Dr                          Cr

                             The name of account to debit                                      XX

READ ON  READ SEVEN FINANCIAL OBJECTIVES OF A BUSINESS

                                      The name of account to credit                                                           XX

                             The Narration

A book for Accounting technicians in Nigeria explained that the name of the account to be debited is always shown first.

The name of the account to credit is inset to the right hand side.

The narration is not indented. A blank space should be left after each entry to make each set of journal entries stand out clearly.

ADVANTAGES OF GENERAL JOURNAL

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It is economical than the ledger.

It is easy to record.

The naration makes it easier to understand.

It is can be used to correct errors made in the ledger.

Most business can used it to show transactions that took place when they started trading and when they liquidate.

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