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Journal

A business performs a large number of financial transactions daily. It purchases goods from

suppliers and sells to its customers. It returns well to suppliers. It receives goods returned by itscustomers. It deposits cash in the bank and withdraws from the customers. It pays for expenses

like salary, rent, stationery, advertisement and insurance premium. It borrows loan and returns it

on maturity. The transactions should be recorded immediately in memorandum books and whenthey take place. The memorandum book is also called waste book or rough book. It is treated as a

temporary record of these transactions, which helps to prepare journal. In fact, the journal is the

first step of the accounting process.

Journal is the first book to keep a systematic record of all the business transactions. It is the firstentry of all the financial transactions. It is the original book or primary book in which the

financial transaction is first recorded in order of date and helps to maintain the principal book or

ledger. It is the book of prime entry in which each and every transaction is registered showing

debit and credit aspects with a brief explanation called narration.

The following are the main definition of journal

!A journal is a book, employed to classify or sort out transactions in a form convenient for their

subse"uent entry.!#L.C. Cropper

!The journal or daily record as originally used was a book of prime entry in which transactionswas copied in order to date from a memorandum or waste book. The entries as they were copied

were classified into debits and credits, so as to facilitate they$re being correctly posted afterwards

in the ledger.!#R. N. Carter.

Objectives

The main objectives of journal are given below

%. To make permanent and systematic record of all the financial transactions.

&. To help to prepare the principal book or ledger.

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'. To provide legal evidence of all the financial transactions performed by the business.

(. To present complete information of each transaction.

). To show debit and credit aspects or accounts involved in each transaction.

Importance of Journal

%. It provides the legal evidence of all the transactions performed by an organi*ation.

&. It provides the foundation for further accounting processes of the transactions.

'. It provides the basis for preparing ledger accounts.

(. It helps to minimi*e errors in recording and posting due to the involvement of both

aspects of the transactions.

). It fulfills the further accounting processes of the transactions.

Journaling

The financial transactions are first of all recorded in the journal. The process of recording thefinancial transactions in the journal in a systematic way is called journali*ing. The record of the

transactions made in the journal is called journal entry. Journali*ing is the act of passing journal

entry. The following steps are taken into consideration while journali*ing the transactions

%. Identifying the two aspects of each transaction.

&. Identifying the appropriate accounts of these two aspects of each transaction.

'. +ecording each transaction in the journal book involving debit and credit accounts in

chronological order.

(. Identifying the debit and credit accounts of each transaction by applying the rules of debitand credit.

Rules of Journalizing:

According to the double entry system, every transaction is recorded in the journal involving itstwo aspects. ne aspect of the transaction is debited in one account and the other aspect is

credited in another account involving the e"ual amount. The crucial task while journali*ing thetransaction is to decide the account to be debited and credited. The system record of a transaction

in the journal book is called journal entry, the process of passing journal entry is called

 journalism.The rules are also known as rules of debit and credit.

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1. Personal ccount: It is the account of a person or organi*ation or debtor or creditor. It is the

record of an individual or organi*ation. -nder it, the person receiving the benefit is debited and

the person giving benefit is credited. The rule of journali*ing in personal account is as follows

• ebit the receiver 

• /redit the giver 

!. Real ccount: It is an impersonal account. It is the account of a real thing or property. It is the

record of assets of the business. -nder, it asset coming into the business through its purchase is

debited and the asset going out of the business through its sale is credited. The rule of

 journali*ing in real account is as follow

• ebit what comes in

• /redit what goes out

". Nominal account: It is another impersonal account. It is the account of expenses, loss,

income, and profit. It has no any physical shape. It does not exist in the business in real form. It

appears only in the books. It is the record of financial sacrifice against the service received andthe record of financial benefit against the service rendered. The rule of journali*ing in nominal

account is as follows

• ebit all expenses and losses

• /redit all incomes and profits

 Journal Entries

ifferent kind of business transaction is recorded in the journal in se"uential order. 0hen the

 journal transaction is recorded in the journal it becomes journal entries. Journal entries are the

systematic order record of the financial transaction in the journal. Journal entries consist of the

name of debit and credit involved in the financial transaction with a brief narration. It is the basis

of making ledger. There is example of two transactions and their journal entries

1aisakh %2 /ash of +s. %2222 received from ram.

1aisakh %% 3aid for the salary of +s. )222 and rent +s. )222.

Journal #ntries

Date Particular L.F Debit Rs. Credit Rs.

Baisakh 10 Cash a/c.............................Dr. 10,000

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 To Ra!s a/c 10,000

"Bein# cash recei$ed %ro Ra&

Baisakh 11 'alar( a/c....................................Dr. )000

Rent a/c......................................Dr. )000

 To Cash a/c 10,000

"Bein# *aid %or salar( and rent&

 Total 20,000 20,000

Simple and compound journal entry

4imple journal entry is composed of one debit and another credit account. The journal entry of

1aisakh %2 shown above is the simple journal entry.

/ompound journal entry is the combination of two or more than two simple journal entries. It

contains two or more than two accounts either in debit or in credit. In fact, two or more simple

entries can be combined and passed one compound entry if the data and an account of these

entries are common.The journal entry of 1aisakh %%shown above is the compound journal entry.

 Journaling simple transactions

#$ample 1

/haitra % 5ari started a business with cash of +s. )),222.

/haitra ) 5ari deposited cash of +s. ()222 in the bank as his additional capital.

/haitra 6 5ari withdrew cash of +s. &222 from the business as his additional capital.

/haitra 7 5ari withdrew cash of +s '222 from the bank for his personal use

/haitra 8 5ari 0ithdrew goods of +s.(222 from the business for his personal use.

Journal #ntries

Date ParticularL.

F

Debit

Rs.

Credit

Rs.

Chaitra

1Cash a/c.............................Dr. )),000

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 To Ca*ital a/c )),000

"Bein# business started +ith cash&

Chaitra

)Bank a/c....................................Dr. )000

 To Ca*ital a/c )000

"Bein# the o+ner de*osited cash in the bank as his

additional ca*ital&

Chaitra

-Dra+in# a/c................................Dr. 000

 To Cash a/c 000

"Bein# cash +ithdre+ %ro business %or *ersonal use&

Chaitra

Dra+in# a/c...................................Dr. 000

 To Bank a/c 000

"Bein# cash sales&

Chaitra

Dra+in# a/c...................................Dr. 000

 To Purchase a/c 000

"Bein# #oods +ithdre+ %ro the business %or *ersonal

use&

 Total1,090

00

1,0900

0

#$ample !:

a. 2oods *urchased %or cash Rs. )00

b. Cash sales ade %or Rs. 1)00

c. 2oods *urchased %ro 3rishna on credit %or Rs. 4000

d. Purchased #oods %ro 5e#haCenter %or rs. 000

e. Returned #oods to 5e#ha Center o% rs )00 bein# de%ecti$e

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%. 'old #oods to Barsha Centre %or rs 4000

#. Returned #oods b( Barsha Center o% Rs. 00 bein# daa#ed.

Date Particular L.F Debit Rs. Credit Rs.

a Purchase a/c.............................Dr. )00

 To Cash a/c )00

"Bein##oods *urchase %or cash&

b Cash a/c....................................Dr. 1)000

 To 'ales a/c 1)000

"Bein# #oods sold %or cash&

c Purchase a/c................................Dr. 4000

 To 3rishna a/c 4000

"Bein# #oods *urchased %ro krishna on credit&

d Purchase a/c...................................Dr. 000

 To 5e#ha center a/c 000

"Bein# #ood *urchased %ro 5e#ha center on

credit&

e 5e#ha Center a/c...................................Dr. )00

 To Purchase a/c )00

"Bein# #oods returned to 5e#ha Center&

%. Barsha Center a/c...................................Dr. 4000

 To 'ales a/c 4000

"Bein# #oods sold Barsha Center on Credit&

# 'ales return a/c............................Dr. 00

 To Barsha Center a/c 00

"Bein# #oods return b( Barsha Center&

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 Total 37,300 37,300

#$ample ":

3ass journal entries of the following transaction

1. Purchased %urniture %or cash Rs. 10,000

. Purchased a achine %ro 5ahakali 'tationar( Ltd. %or Rs. -)000

. 'old an old co*uter %or rs. )000

Journal #ntries

Date Particular L.FDebit

Rs.

Credit

Rs.

1. Furniture a/c.............................Dr. 10,000

 To 'iddhi!s a/c 10,000

"Bein# *urchased %urniture&

. 5achiner( a/c....................................Dr. -)000

 To 5ahakali 'tationar( Ltd a/c -)000

"Bein# achine *urchased %ro 5ahakali 'tationar(

Ltd.&

. Cash a/c................................Dr. )000

 To o6ce e7ui*ent a/c )000

"Bein# cash *aid to siddhi&

 Total 90,000 90,000

 Journaling compound transactions

Transaction of same data having a common account in one aspect are compound transactions. Asingle entry is passed for such compound transaction, which is known as compounded journal

entry.

#$ample 1:

1. Recei$ed cash o% Rs. )0 %ro 5ikal and allo+ed discount o% Rs.)0

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. Paid cash o% Rs.-)0 to 8nuradha and recei$ed discount o% Rs.)0

. Recei$ed cash o% Rs.)0 %ro Tritha in %ull settleent o% his account Rs. 1000

. Paid cash o% Rs. ) to 9sha in %ull settleent o% her account Rs.1000

Journal #ntries

Date Particular L.FDebit

Rs.Credit Rs.

1 Cash a/c.......................................Dr. )0

Discount allo+ed a/c.......................Dr. )0

 To 5ikal!s a/c 1000

"Bein# cash recei$ed %ro 5ikal and allo+eddiscount&

8nuradha!s a/c....................................Dr. 00

 To Discount recei$ed a/c )0

 To Cash a/c -)0

"Bein# cash *aid to 8nuradha and recei$ed discount&

Cash a/c........................................................Dr. )0

Discount allo+ed a/c........................................Dr )0

 To Tirtha!s a/c 1000

"Bein# cash recei$ed %ro Tritha and allo+ed

discount&

9sha!s a/c...................................Dr. 1000

 To Discount recei$ed a/c )0

 To Cash a/c )0

"Bein# cash *aid to usha and recei$ed discount&

 Total