The following transactions took place in the business of Priya during the year ended 31 December 2025. These transactions are not recorded in any other book...

(a) General Journal Entries

The general journal records transactions that cannot be entered in any other book of prime entry. Each entry requires a debit, a credit, and a narration explaining the purpose.

Key points for each entry:

• Entry 1: A non-current asset purchased on credit cannot be recorded in the purchases day book (which is only for goods for resale) or the cash book (since no cash changed hands). The journal is the correct book of prime entry.
• Entry 2: When a debtor cannot pay, the debt is written off. The receivable is removed by crediting the debtor, and the loss is debited to irrecoverable debts expense.
• Entry 3: This is a correction of error. Stationery is an expense, not a purchase of goods for resale. The correction removes $150 from purchases and records it under stationery.
• Entry 4: Depreciation spreads the cost of the equipment over its useful life. The expense is charged to the income statement, and the provision accumulates over the asset's life.
• Entry 5: When the owner introduces a personal asset, it increases both the asset and the owner's capital by the asset's value.
• Entry 6: Closing inventory is an asset at the year end. It is debited to the statement of financial position (as a current asset) and credited to the income statement (reducing cost of goods sold).
• Entry 7: Net profit belongs to the owner and is transferred from the income statement to the capital account at the year end.

(b) Purpose of the general journal

The general journal records transactions that cannot be entered in any other book of prime entry. [1] These include opening entries, correction of errors, purchase or sale of non-current assets on credit, writing off irrecoverable debts, depreciation, and year-end adjustments. [1]

(c) Why the general journal is a book of prime entry

A book of prime entry (also called a book of original entry) is the place where a transaction is first recorded before being posted to the ledger accounts. [1] The general journal serves this role for transactions that have no other specialised book - it is the initial point of record. [1]

(d) Why narrations are important

Narrations explain the reason for each journal entry, providing essential context about why the transaction was recorded. [1] They create an audit trail, making it easier to review, verify, and understand entries at a later date, especially during audits or when resolving queries. [1]