Question

Fiona Sporty uses a purchases journal, a cash payments journal, a sales journal, a cash receipts journal and a general journal. Indicate in which journals the following transactions are most likely to be recorded. a) Purchased inventories on credit (2 marks) b) Sales of inventory on credit (2 marks) c) Received payment of a customer’s account (2 marks) d) Payment of monthly rent by cheque (2 marks) e) End of period closing entries (2 marks)

Answer 1

Fiona Sporty

Indication of Journals for Transactions:

a) Purchased inventories on credit (Purchases Journal)

b) Sales of inventory on credit (Sales Journal)

c) Received payment of a customer’s account (Cash Receipts Journal)

d) Payment of monthly rent by cheque (Cash Payments Journal)

e) End of period closing entries (General Journal)

Step-by-step explanation:

Journals are used to record business transactions as they occur on a daily basis. They are the first records of business transactions in the accounting books. From the journal, transactions are posted to the general ledger. Journals also determine the accounts to be debited and credited respectively. While some of these journals are for specific transactions, e.g. Purchases Journal, the General Journal is mostly used for all transaction-types, but more especially for adjusting and closing entries and for correction of accounting errors.