ZIMSEC O Level Principles of Accounts Notes: General Journal opening new books entries
- This is a solution to a question found here
- One of the uses of the Journal is to create a new set of books when a propieter decides to move on to double entry and keeping a proper set of accounts
- Now we will present the solution:
a) Capital can be calculated using the accounting equation:
- The equation is also known as the balance sheet equation
- It states that Capital=Assets-Liabilities
- You should note that the equation can be changed to find any variable as long as the other two are known
- This can be done by changing the subject of the formula
- In this case first you need to find the total amount of assets:
| Assets | Amount |
|---|---|
| Motor Van | 3700 |
| Fixtures | 1800 |
| Stock | 4200 |
| Debtors | 140 |
| Bank | 860 |
| Cash | 65 |
| Total | 10765 |
- Our creditors are:
- 129+410=539
- So our Capital would be:
- 10765-539
- $10 226
b) Since 1 July is the date on which P Chiyangwa determined his assets and liabilities and established what they were we will use this as the starting day for our accounts. You need to take the following steps in order to record these entries in the Journal:
- Create entries for each asset on the debit side
- Create entries for each of these liabilities on the credit side
- Open an account for capital and show it as a credit balance
The entries would be:
| Journal Entries | |||
|---|---|---|---|
| Date | Details | Dr | Cr |
| 20x7 1 Jul | $ | $ | |
| Van | 3700 | ||
| Fixtures | 1800 | ||
| Stock | 4200 | ||
Debtors:
|
| ||
| Bank | 860 | ||
| Cash | 65 | ||
Creditors:
|
|
||
| Capital | 10226 | ||
10765 | 10765 |
||
c) Now that we have the Journal entries the ledger accounts will be extremely easy to make:
| Purchases(Creditor's) Ledger | ||||||||
| DR | M Mussa Account | CR | ||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |||
| 1 Jul | Balance | 129 | ||||||
| DR | Econet Account | CR | ||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |||
| 1 Jul | Balance | 410 | ||||||
| Debtor's(Sales Ledger) Ledger | ||||||||
| DR | R Runesu Account | CR | ||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |||
| 1 Jul | Balance | 95 | ||||||
| DR | Z Zengeni Account | CR | ||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |||
| 1 Jul | Balance | 45 | ||||||
| DR | Cash Book | CR | ||||||
| Date | Details | Cash($) | Bank($) | Date | Details | Cash($) | Bank($) | |
| 1 Jul | Balance | 65 | 860 | |||||
| General Ledger | ||||||||
| DR | Motor Van Account | CR | ||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |||
| 1 Jul | Balance | 3700 | ||||||
| DR | Fixtures Account | CR | ||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |||
| 1 Jul | Balance | 1800 | ||||||
| DR | Stock Account | CR | ||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |||
| 1 Jul | Balance | 4200 | ||||||
| DR | Capital Account | CR | ||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |||
| 1 Jul | Balance | 10226 |
- Now in an exercise/exam the exact items might differ from this but the principles are the same
To access more topics go to the Principles of Accounts Notes.
