## **Learning Outcomes**

After completing this article, you will be able to explain the role and structure of the general journal, identify typical transactions requiring journal entries, prepare journal postings in correct format with narratives, and understand how journals connect to general ledger accounts for financial records. You will also practice applying these skills to adjustments and error corrections as required for the ACCA Maintaining Financial Records (FA2) exam.

## **ACCA Maintaining Financial Records (FA2) Syllabus**

For ACCA Maintaining Financial Records (FA2), you are required to understand how to use journals to record accounting transactions correctly and post them to the general ledger. This article specifically covers:

- The purpose and function of the general journal in bookkeeping
- Preparation of journal entries for non-routine and adjusting transactions
- Proper journal format, including dates, accounts, amounts, and narratives
- Posting journals to general ledger accounts
- Use of journal entries for corrections and year-end adjustments

## **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. Which type of transaction is MOST LIKELY to require a manual journal entry rather than being processed through the book of prime entry?
   a) Routine credit sales
   b) Correction of an error
   c) Bank payments for electricity
   d) Daily cash receipts

2. In a proper journal format, which of the following should ALWAYS be included?
   a) The account balances brought forward
   b) The narrative explaining the entry
   c) The cash book reference
   d) The supplier statement reconciliation

3. True or false? Every journal entry must have equal total debits and credits.

4. Briefly state what the purpose is of providing a narrative (description) with each journal entry.

## **Introduction**

Correctly recording complex or unusual accounting transactions is essential for producing reliable financial statements. Many non-routine transactions—such as year-end adjustments, error corrections, and provisions—cannot be processed through the usual books of prime entry (like the sales or purchase day book). Instead, they are documented using the general journal.

The journal provides an auditable and transparent record of double-entry bookkeeping for adjustments and corrections. Command of journal format and postings is a core skill tested in the FA2 exam and is fundamental to maintaining accurate and compliant financial records.

> **Key Term: general journal**
> A book of prime entry used to record non-routine transactions, adjustments, and corrections, setting out the full double-entry for posting to the ledger.

## **Journal Format and Essential Features**

### The Purpose of the General Journal

The general journal functions as the accounting record for any transaction that does not originate in the standard day books (such as sales, purchases, or cash books). Common uses include:

- Year-end adjustments (accruals, prepayments, depreciation)
- Error corrections and suspense account clearings
- Irrecoverable debt write-offs
- Non-routine assets and provisions adjustments

> **Key Term: journal entry**
> The double-entry record of a specific transaction, documented in the general journal, showing affected accounts, debits, credits, and a brief explanation.

### Standard Format of a Journal Entry

A correctly formatted journal entry includes the following columns:

| Date       | Details (Account Name) | Debit ($) | Credit ($) | Narrative (Explanation)                     |
| ---------- | ---------------------- | --------- | ---------- | ------------------------------------------- |
| 01/03/20X8 | Accrued Expenses       | 1,200     |            | To record utility costs accrued at year-end |
|            | Utilities Expense      |           | 1,200      |                                             |

**Key journal entry features:**

- Date of transaction
- Debit and credit account names
- Amounts recorded in correct columns (debits = credits)
- Concise narrative(also called “description”) explaining the entry and its purpose
- Reference numbers or authorisation details may be added for control but are less likely to be examined at FA2 level

> **Key Term: narrative**
> A brief description included in each journal entry, stating the reason for the entry and aiding audit trail and clarity.

## **Posting Journal Entries to the General Ledger**

After a transaction is entered in the journal, each entry must be transferred (posted) to the relevant general ledger accounts. The procedure is:

1. For each line in the journal, identify the general ledger account and whether it is a debit or credit.
2. Record the amount in the appropriate side of the T-account (debit left, credit right).
3. Include a reference to the journal (often the journal number or date) for traceability.
4. After posting, totals can then be reflected in the trial balance.

All journal entries must maintain the rule that total debits equal total credits for each transaction.

> **Key Term: posting**
> The process of transferring journal entries to the corresponding general ledger accounts to update balances.

## **Transactions Typically Requiring Journal Entries**

- Adjusting for accrued and prepaid expenses or income
- Depreciation charges
- Irrecoverable (bad) debt write-offs or recovery
- Correction of errors discovered in the ledger
- Asset disposals and gains or losses on sale
- Year-end inventory adjustments

Regular sales, purchases, or cash transactions will usually be processed through the respective day books and posted automatically.

### **Worked Example 1.1**

**Required:** Prepare a journal entry to write off an irrecoverable debt of \$800 owed by a customer, F Chan.

> **Answer:**
>
> | Date | Details | Debit (\$) | Credit (\$) | Narrative |
> |------------|------------------------|-----------|------------|-------------------------------|
> | 31/12/20X7 | Irrecoverable Debts | 800 | | To write off F Chan's debt |
> | | Trade Receivables | | 800 | |
> This entry reduces the receivables ledger and records the expense.

### **Worked Example 1.2**

**Required:** A repairs expense of \$500 was incorrectly posted to the motor vehicles account. Prepare the journal to correct this.

> **Answer:**
>
> | Date | Details | Debit (\$) | Credit (\$) | Narrative |
> |------------|-----------------|-----------|------------|-----------------------------------|
> | 31/12/20X7 | Repairs Expense | 500 | | To correct repairs posted to Asset|
> | | Motor Vehicles | | 500 | |
> This moves the cost from asset to expense.

## **Best Practice in Journal Writing**

- Use clear, accurate account names matching the general ledger.
- Provide a brief narrative for every entry.
- Always check that debits equal credits.
- Use journals only for adjustments, corrections, or unusual items—not regular daily transactions.

### **Exam Warning**

> In the FA2 exam, you may be asked to select the correct journal entry for an adjustment or error correction—even if in real life, the transaction would typically be handled differently. Focus on the logic of double-entry and the required accounts.

## **Summary**

The general journal is essential for recording non-routine or adjusting transactions, providing a clear trail for double-entry postings. Journal entries must be accurate, balanced, and fully explained. After preparation, postings update the relevant general ledger accounts to ensure the financial records are complete and reliable for trial balance and financial statement preparation.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- State the purpose and application of the general journal
- Structure a correct journal entry, including accounts, amounts, and concise narratives
- Identify transactions typically requiring journal entries (e.g., adjustments, corrections)
- Post journal entries to corresponding general ledger accounts
- Recognise the importance of accuracy and explanations in journal documentation

## **Key Terms and Concepts**

- general journal
- journal entry
- narrative
- posting


General journal usage - Journal format and postings