## **Learning Outcomes**

After reading this article, you will be able to explain the role of the general journal in accounting, identify when journal entries are required, and describe how journal adjustments are made. You will also be able to prepare and interpret journal entries for corrections, non-routine transactions, and year-end adjustments, in accordance with ACCA FA1 requirements.

## **ACCA Recording Financial Transactions (FA1) Syllabus**

For ACCA Recording Financial Transactions (FA1), you are required to understand the principles and usage of the general journal and adjustments. In particular, you should focus on:

- Explaining the purpose and structure of the general journal
- Identifying when journal entries are necessary for non-routine or adjusting transactions
- Preparing and recording journal entries for error corrections and period-end adjustments
- Recognising the differences between routine double-entry recording and journal adjustments
- Understanding the impact of journal entries on the financial records and control processes

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. What is the main purpose of recording a transaction in the general journal?
2. Which of these requires a journal entry?
   a) routine cash sale
   b) writing off an irrecoverable debt
   c) payment to a supplier
   d) issuing an invoice to a customer
3. How would you correct an error where an expense was omitted from the ledgers?
4. True or false? All adjustments for accruals and prepayments must be recorded using the general journal.

## **Introduction**

While most routine transactions are recorded directly in ledger accounts or through automated systems, you must understand when and why to use the general journal. The journal is essential for documenting transactions that do not arise from standard business activities, as well as for making adjustments or correcting errors to maintain the integrity of accounting records.

> **Key Term: general journal**
> The official record where non-routine transactions, corrections, and adjustments are set out as double-entry bookkeeping entries before posting to ledger accounts.

## **WHEN TO USE THE GENERAL JOURNAL**

The general journal is not used for everyday transactions such as sales, purchases, or standard cash receipts and payments. Instead, it is required when transactions:

- Do not originate from source documents typically used for main ledgers
- Represent corrections or adjustments outside normal procedures
- Are year-end accounting adjustments (e.g., accruals, prepayments, depreciation)
- Must be documented for clarity and audit trail

> **Key Term: journal entry**
> A double-entry record in the general journal detailing debits and credits for a specific transaction or adjustment, including a brief description and reference.

## **TYPICAL JOURNAL ADJUSTMENTS**

You will use the general journal most commonly for:

### Error Corrections

If a transaction is entered incorrectly (wrong account, wrong amount, single-sided entry), a correcting journal entry is required to remove the error and repost the transaction properly.

### Non-Routine Transactions

Entries such as writing off irrecoverable debts, creating provisions, or disposing of non-current assets are made through the journal because they are not linked to typical sales or purchase processes.

### Period-End Adjustments

At the end of an accounting period, adjustments for accruals (expenses incurred but not recorded) and prepayments (expenses paid in advance), closing inventory, and depreciation are made using journal entries.

> **Key Term: adjustment**
> A journal entry made to record income or expenses in the correct accounting period, or to ensure ledger balances are accurate before preparing the trial balance or financial statements.

## **FORMAT AND CONTENT OF THE JOURNAL**

A standard journal entry must include:

- Date of transaction
- Account titles to be debited and credited
- Monetary amounts for each entry
- References to related documents or supporting evidence
- Brief narrative explaining the reason for the entry
- Initials or authorisations, if required

The total debit(s) and credit(s) must always agree for each journal entry.

### **Worked Example 1.1**

**Q: On 1 March, a business discovers that insurance expense of \$400, paid during February, was not recorded in the ledgers. How should this be recorded?**

> **Answer:**  
> Prepare a journal entry:
>
> - Debit Insurance expense \$400
> - Credit Cash at bank \$400  
>   Narrative: "To record omitted insurance payment for February."

### **Worked Example 1.2**

**Q: The purchase of a delivery van for \$8,000 was posted to the Motor Expenses account instead of Motor Vehicles. How do you correct this using the general journal?**

> **Answer:**  
> Prepare a journal entry:
>
> - Debit Motor Vehicles \$8,000
> - Credit Motor Expenses \$8,000  
>   Narrative: "To reclassify van purchase incorrectly posted to Motor Expenses."

## **ADVANTAGES OF USING THE GENERAL JOURNAL**

Recording adjustments and corrections in the journal ensures:

- A clear audit trail for all changes to accounts
- Authorisation and supporting evidence for non-routine entries
- Accuracy and reliability of ledger balances

All entries made via the journal are cross-referenced with the ledgers to maintain control.

> **Key Term: narrative**
> A brief description included in a journal entry explaining the purpose of the entry.

## **Common Scenarios Requiring Journal Entries**

- Correction of double-entry mistakes
- Adjusting accruals/prepayments at period-end
- Recording depreciation or disposal of fixed assets
- Writing off irrecoverable debts
- Creating or reversing provisions
- Year-end closing transfers (e.g., profit or loss to capital)

### **Exam Warning**

> Journal entries must be supported by adequate documentation and properly authorised. Failing to keep clear records, or omitting a narrative, can result in audit issues or failing to correct errors properly.

### **Revision Tip**

> Focus your revision by practising journal entries for error correction and typical year-end adjustments. Ensure you can identify the correct accounts to debit and credit for each scenario.

## **Summary**

The general journal is used for documenting non-routine transactions, making necessary adjustments, and correcting errors to keep financial records accurate. Journal entries are a critical part of the internal control and reporting process.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- Define the purpose and structure of the general journal
- Identify situations when journal entries are required
- Prepare journal entries for adjustments and corrections
- Understand required content for a valid journal entry
- Recognise the importance of narratives and authorisation
- Apply journal use to error correction and period-end adjustments

## **Key Terms and Concepts**

- general journal
- journal entry
- adjustment
- narrative

The journal and adjustments - When and why to use the general journal