Journal Explanations.—When these various classes of transactions are entered in the Journal, a very complete explanation should be given the entry. In fact, all entries covering settlements and adjustments with outsiders and within the business itself are of primary importance and the explanation should be so carefully worded as to make the intent of the entry plain and intelligible.
Closing and Posting the Journal.—No particular formality attaches to the closing and posting of the ordinary standard form of journal. There is no summary entry, no totaling, and there are no rulings to be made. Ordinary care must be exercised to see that the debits and credits are correctly posted. Since the entry in the Journal is given in its complete form and no debits or credits are suppressed, as is the case in the special journals, posting is not difficult.
The Analytic Journal with Divided Columns.—One form of the journal has its debit and credit columns separated, the debit money column appearing at the extreme left of the page, followed in order across the page by columns for date, account classification, ledger folio, and credit money amount. This kind of journal is called a divided or split-column journal and is ordinarily used to collect the totals to be posted to controlling accounts and thus to secure control over subsidiary ledgers. This matter will be fully discussed in later chapters. When the journal is so used it is provided with additional debit and credit analysis columns on each side according to the subsidiary ledgers employed. A divided-column journal with three debit and three credit columns is shown in [Form 14]. There is always a general money column on each side, the other columns depending on the kind of analysis required by the business.
Form 14. Divided Column Journal
In the illustration referred to, an Accounts Receivable and an Accounts Payable column are provided. It is obvious that the Accounts Receivable column should usually appear on the credit side and the Accounts Payable column on the debit side; although in some cases provision is also made for an Accounts Receivable column on the debit and an Accounts Payable column on the credit side. The account of S. J. White, a customer, which is paid by his note, should be credited for the amount of $510.20 and consequently the item is extended to the Accounts Receivable column.
Illustrations—Opening Entries.—Illustration will be given of a few typical transactions requiring journal entry. The standard two-column journal will be used.
For the purpose of illustrating opening entries, assume the following data:
On September 30, 19—, Jack Gibson started in business, with the following assets and liabilities: Cash $3,500; Notes Receivable $800; Merchandise $4,000; Furniture and Fixtures $450; Accounts Receivable $2,100; Accounts Payable $1,500; and Notes Payable $1,200.
An analysis of this transaction shows that no part of it belongs to either the purchase or sales journals. The part relating to cash is entered in the cash receipts journal. However, in order to show the complete investment in one place, the entire transaction including the cash part, is entered in the Journal and posted from there, with the exception of the cash item. The reason for this exception is that the cash investment is also entered in the cash book and will find its way to the ledger Cash account through the total cash debits at the end of the period. Because of this the cash item in the Journal should be checked and not posted to the Cash account in the ledger.