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Chapter 5 Books of original entry and ledgers (III) 5.2 General journal (普通日記簿) So far, we have learned the following six books of original entries.

We use a general journal (journal) (普通日記簿) to record other types of transactions (其他交易) that take place less frequently

and do not fit into one of the previous books that we have learned. The transactions in general journal are:

Acquisitions of assets other than goods on credit (賒購貨品以外的資產)

Disposals of assets other than goods on credit (賒銷貨品以外的資產)

Returns of assets other than goods (退還貨品以外的資產)

Contributions of capital other than cash (東主注入現金以外的資本)

Drawings of assets other than cash (東主提取現金以外的資產)

Format (格式) The journal

Date Details Folio Dr Cr

Dr Account name Cr Account name Narration (分錄說明)

$ $

Narration: Give a brief description of the transaction (交易的簡要說明), including a reference to the source document for the

transaction (包括交易的原始單據編號). However, in public examinations, you may not be required to show the

narration in journals.

5.3 Acquisitions of assets other than goods on credit (賒購貨品以外的資產) The acquisitions of assets (賒購資產) that are not for resale (不作買賣) should be recorded in the general journal (普通日記簿)

rather than purchases journal (購貨簿) because the purchases journal records credit purchases of goods for trading only (購貨簿

只記錄用作買賣商品的賒購交易). The double entry for the acquisition of an asset other than goods on credit is:

Dr Asset account (in the general ledger)

Cr Creditor’s account (in the general ledger)

Example: A car was bought on credit from Tiger Ltd for $55,000 on 10 July 2005. An invoice numbered 159 was received. As the

car was not bought with the intention of resale in the near future, it should be recorded in the general journal. The

transaction would be recorded in the journal as follows:

The journal Page: 51


2005 $ $ Jul 10 Motor vehicles GL11 55,000 Tiger Ltd GL35 55,000 Purchase of a car on credit; purchase invoice no. 159.

General Ledger Motor Vehicles Page: 11

2005 Folio $

Jul 10 Tiger Ltd J51 55,000

Tiger Ltd Page: 35

2005 Folio $

Jul 10 Motor Vehicles J51 55,000

Name : _________________

Serial No: _____

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Class work 1 Bought office equipment from Emma Office Appliance Ltd on credit for $25,000 at 3 Jan 2010.

The journal Date Details Dr Cr

2010 $ $

Jan 3 Office equipment 25,000

Emma Office Appliance Ltd 25,000

General Ledger Office equipment

2010 $

Jan 3 Emma Office Appliance Ltd 25,000

Emma Office Appliance Ltd 2010 $

Jan 3 Office equipment 25,000

5.4 Disposals of assets other than goods on credit (賒銷貨品以外的資產) The disposals of assets (出售資產) that are not for resale (不作買賣) should be recorded in the general journal (普通日記簿)

rather than sales journal (銷貨簿) because the sales journal records credit sales of goods for trading only (銷貨簿只記錄用作買

賣商品的賒銷交易). The double entry for the disposal of an asset other than goods on credit is:

Dr Debtor’s account (in the general ledger) Cr Asset account (in the general ledger)

Example: A fax machine was sold at its cost price of $3,000 on credit to W Tam on 12 July 2005. As this machine was not bought with the intention of resale, it should be recorded in the general journal. The transaction would be recorded in the journal as follows:



2005 $ $ Jul 12 W Tam GL38 3,000 Office equipment GL14 3,000 Sale of a fax machine on credit; letter reference no. 15/7/43.

General Ledger W Tam Page: 38

2005 Folio $

Jul 12 Office equipment J51 3,000

Office equipment Page: 14

2005 Folio $

Jul 12 W Tam J51 3,000

Class work 2 A motor vehicle was sold to Liz Hung on credit at its cost price of $20,100 at 12 March 2009.


2009 $ $

Mar 12 Liz Hung 20,100

Motor vehicle 20,100

General Ledger Liz Hung

2009 $

Mar 12 Motor vehicle 20,100

Motor vehicle

2009 $

Mar 12 Liz Hung 20,100

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5.5 Returns of assets other than goods (退還貨品以外的資產給債主) The returns of assets other than goods should be recorded in the general journal (普通日記簿) rather than returns outwards

journal (購貨退出簿) because the returns outwards journal records returns of goods only (購貨退出簿只記錄用作買賣商品的

退貨交易). The double entry for the return of an asset other than goods to the creditor is:

Dr Creditor’s account (in the general ledger)

Cr Asset account (in the general ledger)

Example: A laser printer was bought for $4,100 on creditor and was later found to be faulty. It was not yet paid for. On 6 August

2005, it was returned to the supplier, SK Ltd, with a debit note numbered 14296. An allowance of $4,100 was given, so it

would not have to be paid for.



2005 $ $ Aug 6 SK Ltd GL58 4,100 Office equipment GL14 4,100 A laser printer returned to the supplier; debit note no. 14296. Full

allowance given.

General Ledger SK Ltd Page: 38

2005 Folio $

Aug 6 Office equipment J53 4,100

Office equipment Page: 14

2005 Folio $

Aug 6 SK Ltd J53 4,100

Class work 3 A machine which was previously bought from Harry Ltd at a cost of $5,700 was found to be unsuitable. On 19 June 2008, it was

returned to Harry Ltd and he agreed to provide a full refund next month.


2008 $ $

Jun 19 Harry Ltd 5,700

Machinery 5,700

Return of a machine.

General Ledger Harry Ltd

2008 $ Jun 19 Machinery 5,700

Machinery 2008 $

Jun 19 Harry Ltd 5,700

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Class work 4 On 1 January 2007, Frankie’s business owned a car costing $40,000. The following transactions were made in January

2007:

2007 Transactions

Jan 5 Bought two new cars for $50,000 each on credit from Motors Co.

" 8 Sold the old car at cost to Motors Co as a partial settlement of the outstanding debt.

" 10 Returned one of the new cars to Motors Co as it was found to be faulty.

(a) Record the above transactions in the following journal. No need to record the narrations.

The journal Page: 21 Date Details Folio Dr Cr

2007 $ $

Jan 5 Motor vehicles GL16 100,000

Motors Co GL46 100,000

" 8 Motors Co GL46 40,000

Motor vehicles GL16 40,000

" 10 Motors Co GL46 50,000

Motor vehicles GL16 50,000

(b) Post the entries to the general ledger accounts. You are also required to balance off the accounts at the end of the

month.

General Ledger

Motor vehicles Page: 16

2007 Folio $ 2007 Folio $

Jan 1 Balance b/d 40,000 Jan 8 Motors Co J21 40,000

" 5 Motors Co J21 100,000 " 10 Motors Co J21 50,000

" 31 Balance c/d 50,000

140,000 140,000

Motors Co 6


Jan 8 Motor vehicles J21 40,000 Jan 5 Motor vehicles J21 100,000

" 10 Motor vehicles J21 50,000

" 31 Balance c/d 10,000

100,000 100,000

(c) How much value of motor vehicles did Frankie’s business own on 31 January 2007? 50,000

(d) How much did Frankie’s business owe Motors Co on 31 January 2007? 10,000

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5.6 Contributions of capital other than cash (東主注入現金以外的資本) The double entry for the contributions of capital other than cash is:

Dr Asset account (in the general ledger)

Cr Capital account (in the general ledger)

Example: The owner of a business contributed furniture valued at $3,000 on 10 March 2008.



2008 $ $ Mar 10 Furniture GL82 3,000 Capital GL13 3,000 Furniture contributed by the owner, see memo 2/43/79

General Ledger Furniture Page: 82

2008 Folio $

Mar 10 Capital J26 3,000

Capital Page: 13

2008 Folio $

Mar 10 Furniture J26 3,000

Class work 5 Jacob contributed to the business a car worth $230,000 on 1 January 2010.


2010 $ $

Jan 1 Motor vehicles 230,000

Capital 230,000

A car contributed by the owner.

General Ledger

Motor vehicles

2010 $

Jan 1 Capital 230,000

Capital

2010 $

Jan 1 Motor vehicles 230,000

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5.7 Drawings of assets other than cash (東主提取現金以外的資產) The owner may withdraw assets other than cash for his private use.

(a) The double entry for drawings of assets (goods) other than cash is:

Dr Drawings account (in the general ledger)

Cr Purchases account (in the general ledger)

Example: The owner of a business took goods of $600 for his private on 5 July 2006.



2006 $ $ Jul 5 Drawings GL171 600 Purchases GL333 600 Goods taken by the owner; see memo 1/55/68

General Ledger Drawings Page: 171

2006 Folio $

Jul 5 Purchases J66 600

Purchases Page: 333

2006 Folio $

Jul 5 Drawings J66 600

(b) The double entry for drawings of assets other than cash is:

Dr Drawings account (in the general ledger)

Cr Asset account (in the general ledger)

Example: The proprietor took furniture costing $500 from the business for his personal use on 3 May 2009



2009 $ $ May 3 Drawings GL171 500 Furniture GL333 500 Furniture taken by the owner.

General Ledger Drawings Page: 171

2009 Folio $

May 3 Furniture J66 500

Furniture Page: 333

2009 Folio $

May 3 Drawings J66 600

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Class work 6 Flora Li owns a toys trading firm. The following balances appeared on 1 March 2007:

$

Cash 26,560

Bank 47,570

Computers 78,000

Purchases 89,100

(a) On 2 March 2007, Flora Li took a computer costing $8,000, some toys costing $1,600 and cash $4,000 out of the business for

her personal use. Record the transactions in the following books of original entry:


2007 $ $

Mar 2 Drawings GL35 9,600

Computers GL12 8,000

Purchases GL7 1,600

Cash Book Page: 88 Date Details Folio Cash Bank Date Details Folio Cash Bank

2007 $$ $$ 2007 $$ $$

Mar 11 Balance b/d 26,5600 47,5700 Mar 2 Drawings GL35 4,000

" 31 Balance c/d 22,560 47,5700

26,560 47,5700 26,560 47,5700

Apr 11 Balance b/d 22,560 47,5700

(b) Post the entries to the general ledger accounts. You are also required to balance off the accounts at the end of the month.

General Ledger

Drawings Page: 35


Mar 2 Cash CB88 4,000 Mar 31 Balance c/d 13,600

" 2 Computer J21 8,000

" 2 Purchases J21 1,600

13,600 13,600

Apr 1 Balance b/d 13,600

Computers Page: 12

2007 $ 2007 Folio $

Mar 1 Balance b/d 78,000 Mar 2 Drawings J21 8,000

Mar 31 Balance c/d 70,000

78,000 78,000


Purchases Page: 7

2007 $ 2007 Folio $

Mar 1 Balance b/d 89,100 Mar 2 Drawings J21 1,600

Mar 31 Balance c/d 87,500

89,100 89,100


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5.8 Opening entries (開帳分錄) Opening entries are the entries needed to open a new set of accounting books (企業首次設立帳簿時所需的複式記帳). Opening

entries are required only once (只需一次) in the life of a firm (公司的生命週期). After opening the accounting books, from now

on (從現在開始), daily transactions can be recorded in the ways you have learnt.

Example: S Chan started a business on 1 January 2007. He had not kept any accounts for his business before. On 1 January 2008,

he started to keep accounting records. His firm had the following assets and liabilities on that day:

$ $ Assets: Vans 184,000 Inventory 129,000 Bank 42,000 355,000

Liabilities: Amounts owed to trade creditors: L Lam 32,900 E Pang 24,100 57,000

According to the accounting equation: S Chan’s capital as at 1 January 2008 = $355,000 – 57,000 = $298,000

To open a new set of accounting book, the items would have to be recorded in the journal first, and then posted to the ledger

accounts.


2008 $ $ Jan 1 Vans GL1 184,000 Inventory GL2 129,000 Bank CB1 42,000 Accounts payable: L Lam AP1 32,900 E Pang AP2 24,100 Capital GL3 298,000 Assets, liabilities and capital as at this date recorded to open a set of books 355,000 355,000

The entries in the journal would be posted to the cash book and ledger accounts as follows:

Cash Book Page: 1 Date Details Folio Cash Bank Date Details Folio Cash Bank

2008 $$ $$

Jan 1 Balance J1 0 42,000

General Ledger Vans Page: 1

2008 Folio $

Jan 1 Balance J1 184,000

Inventory Page: 2

2008 Folio $


Capital Page: 3

2008 Folio $


Accounts Payable Ledger L Lam Page: 1

2008 Folio $


E Pang Page: 2

2008 Folio $


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There are still other types of transactions that should be recorded in the journal, such as:

Closing entries (結帳分錄): These are the entries required for closing off accounts at the end of an accounting period (會計期

間結束).

Write-off of bad debts (壞帳註銷): Bad debts are debts that are uncollectible (無法收回).

Correction of errors (錯誤更正)

Those transactions will be introduced in the following Chapter in the future.

Note:

In examination, you will not be required to show the folio columns in the journal and ledger accounts or the references of

source documents in the journal.

You will not have to write narrations for journal entries if the wording ‘no narration is required’ (不需要分錄說明) or

something similar appears in the question.

Class work 7 Show the entries needed in the general journal on 1 January 2008 for opening a set of books for K Ho. After that, post the journal

entries to the ledgers. No narration is required.

The following assets and liabilities existed on 1 January 2008.

1. Buildings $20,000; Fixtures $9,000; Inventory $1,275.

2. Accounts receivable: K Sing $492, L Mok $1,360.

3. Accounts payable: W Ng $545, T Wing $292.

4. Loan owing to T Lee $2,400.

5. Bank balance $9,134 and cash in hand $42.


2008 $ $

Jan 1 Buildings 20,000

Fixtures 9,000

Inventory 1,275

Accounts receivable: K Sing 492

L Mok 1,360

Bank 9,134

Cash 42

Accounts payable: W Ng 545

T Wing 292

Loan from T Lee 2,400

Capital 38,066

41,303 41,303

Cash Book Date Details Cash Bank Date Details Cash Bank

2008 $$ $

Jan 1 Balance 42 9,134

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Accounts Receivable Ledger

K Sing

2008 $

Jan 1 Balance 492

L Mok

2008 $

Jan 1 Balance 1,360

Accounts Payable Ledger

W Ng

2008 $

Jan 1 Balance 545

T Wing

2008 $

Jan 1 Balance 292

General Ledger

Buildings

2008 $

Jan 1 Balance 20,000

Fixtures

2008 $

Jan 1 Balance 9,000

Inventory

2008 $

Jan 1 Balance 1,275

Loan from T Lee

2008 $

Jan 1 Balance 2,400

Capital

2008 $

Jan 1 Balance 38,066

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