GENERAL JOURNAL

The General Journal is another book of original entry. It is used to record several
transaction types and as such has a different format to the other journals.

Date Details Folio Dr. Cr.

2007
Jun 1 A/c to be debited 500
A/c to be credited 500
To record: written explanation

There are several uses for the General Journal:-

 To record opening entries at the start of a business
 To record closing entries of a business
 To record the sale or purchase of an asset
 To record bad debts
 To record the disposal of an asset
 To record the transfer of a debt
 To record the correction of errors in the double entry (see Frank Wood pg 143)

Uses in the correction of errors

Errors in the various ledger books can be classified into two main categories:-
1. Errors affecting the trial balance
2. Errors not affecting the trail balance

Errors not affecting – the trial balance are those which resulted in the same total of debit
entries as credit entries, thus the trial balance balances. This means the same amount of
error was made on either side of the ledger accounts, or the various errors were made
amounting to the same debit and credit balances. Examples of such errors are as
follows:-
1. errors of commission
2. errors of principle
3. errors of original entry
4. errors of omission
5. compensating errors
6. complete reversal of entries error

Errors affecting – the trial balance result in the total debit columns not being equal to
the total credit column in the trial balance. Examples of such errors are as follows:-
1. incorrect additions in the a/cs or casting errors *
2. single side entry into the a/cs (a debit but no credit entry)
3. entering an incorrect amount of the either the debit or credit side of the a/cs

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These errors are corrected by the drawing up of suspense a/cs. These are a/cs drawn to
show the difference in the trial balance.

* Casting in accounting refers to adding up or summing up numbers.

Thus overcastting refers to incorrectly adding up numbers to arrive
at a sum greater than the correct total eg. 5+10 + 20 +15 = 55 when
in fact the correct sum is 50. Similarly undercasting refers to incorrectly
adding up numbers and arriving at a sum less than the correct total.

Method of Correcting Error

1. Use journal entries to show corrections.

2. Post the journals to the ledger a/cs to show corrections in the double entry system.

Types of Errors

Errors of Commission:- these are errors where the correct amount was entered in the
ledger, however in the wrong personal a/c.
Eg. If C. Peters paid us $500 in cash to settle his debt but we accidentally
Recorded the entry in K. Pitters a/c.
General Journal
Date Details Folio Dr. Cr.
K. Pitters SL 500
C. Peters SL 500
To record: cash rec’d but
entered in wrong a/c

Errors of Principle:- these are errors where the transaction was recorded in the wrong
type of a/c. such as an asset being recorded in a nominal a/c.
Eg. On Jun 1st 1998 a motor van was purchased for $10,000 but was
accidentally recorded in the motor expenses a/c.

General Journal
Date Details Folio Dr. Cr.
1998
Jun 1 Motor Van A/c GL 10,000
Motor exp. a/c GL 10,000

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Errors of Original Entry:- these are errors where the incorrect amount was entered in
the ledger a/cs and the error not detected until later.
Eg. The purchase of a table on May 10th 1997 for $1000 was recorded
in the ledger a/cs as $100. The difference must be recorded to reflect the
true value of the table.
General Journal
Date Details Folio Dr. Cr.
1997
May 10 Fixtures GL 900
Bank CB 900
To record: correction of error
Fixtures of $1000 purchased
Instead of $100 as recorded

Errors of Omission:- these are errors where the entire transaction was accidentally left
out of the ledger a/cs.
Eg. On March 15th the cash sale of $500 of stock to M. Martin was left out.
General Journal
Date Details Folio Dr. Cr.
Mar 15 Cash CB 500
Sales GL 500
To record: sale omitted
from books.

Compensating Errors:- these are those which cancel out each other and results in the
trial balance totals equaling.
Eg. If the purchases and sales a/cs were both overstated by $500
General Journal
Date Details Folio Dr. Cr.
Sales GL 500
Purchases GL 500
To record: correction of
Compensating error.

Complete Reversal of Entries:- these are errors where the correct amounts are recorded
in the correct a/cs. but on the wrong side of the double entry.
Eg. We purchased a motor van for $5000 by cheque on Jun 1 st 2007, however we
recorded the transaction by crediting motor van and debiting the bank. The error
discovered on June 13th 2007.
General Journal
Date Details Folio Dr. Cr.
2007
Jun 13 Motor Van GL 10,000
Bank GL 10,000
To record: correction of
complete reversal of entries

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General Journal Uses with Suspense A/c

When drawing up a company’s final a/cs often the trial balance does not balance. When
this occurs all attempts are made to find the error, however if time does not permit any
further delays a suspense a/c is drawn up to deal with the difference (error).

Method of correction:-
1. make journal entry to correct error
2. ensure one side of the correction must be in the suspense a/c and the other
side in the a/c where the error occurred.

If the trial balance needs a credit figure to balance, then the suspense a/c will start with a
credit balance in the amount of the error (or missing figure in trial balance).

Effect of errors on profit:-

Not all errors will have an effect on profit calculations. For example errors which affect
only items in the balance will not affect profit calculations, however if the error occurred
in the trading & profit & loss a/c, then the original profit will be affected.