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Sir what is meant by this line:
“In due course, the ledger accounts will be written up to include the transactions listed in the journal (book of prime entry).”For example, at some stage depreciation will have to be posted, or maybe bad debts written off, or an asset revaluation recorded.
These types of transactions are not sales, purchases or cash related, yet they need to be initiated and explained somewhere. The Journal is where this is done. It is a list of adjustments such as:
Dr Depreciation charge (P&L)
CR Depreciation provision (SOFP)being depreciation on vehicles for the year.
Authorised by: …………..J Smith, chief accountant…………………………………………….
From there, entries are made in the double entry system
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