The book in which the transactions are recorded on the basis of source documents/vouchers in chronological order for the first time is called journal or book of original entry / prime entry. Afterward, transactions from this book are posted to their respective accounts.
Features of Journal Book
The features of journal book are as follows:
(i) A journal contains a permanent record of all business transactions.
(ii) Complete information is available at a single place relating to types of accounts involved in a transaction with the explanation.
(iii) Its use avoids and duplication of transactions.
Advantages of Journal Book
The advantages of journal book are as follows:
(i) The transactions recorded in the journal provide date wise record in chronological order.
(ii) It reduces the chances of committing errors as both aspects of a transactions are recorded in it.
(iii) It facilitates the posting of transaction in the ledger.
Disadvantages of Journal Book
The disadvantages of journal book are as follows:
(i) It is not suitable when the volume of transactions is small. As the size of the transactions increases, the journal is further sub-divided.
(ii) Cash transactions cannot be recorded in the journal to reveal cash balance.
(iii) It is not the substitute of ledger as the balances of various accounts can be known from the ledger book only.
Format of Journal
Parts of the Journal Book
(i) Date column In this column the date of the transaction is recorded.
(ii) Particular column In this column, the detail of the accounts to be debited and credited is recorded. It is usual practice to prefix ‘To’ to the account be credited. A transaction is supported with the brief explanation called narration.
(iii) Debit column In this column, amount to be debited is recorded.
(iv) Credit column In this column, amount to be credited is recorded.
(v) Ledger folio It is the column in the journal book which records the page number of the ledger book on which relevant account appears. This column is filled up at the time of posting and not at the time of making journal entry.
Recording in Journal/Journalising
The process or the way of recording transactions in the journal is called journalising on the basis of source documents.
Important points while recording the transactions:
(i) If the name of a party is given while buying/selling goods or in the cash transactions, the transaction shall be recorded in the cash book and name of such party shall be ignored.
(ii) If the name of the party is given while buying/selling goods or otherwise and the nature of transaction is not given whether on cash or credit, the transaction shall be considered on the credit basis.
(iii) If the name of the party is not given while buying/selling goods or otherwise, the transaction should be considered on the cash basis.
(iv) While making or receiving cash for nominal accounts, transactions shall be considered in cash even if the name of the party concerned is given e.g. salary paid to Ravi ` 10,000.
Recording from the Journal Book to Ledger
The accounts debited and credited in the journal book are taken to their respective accounts in the ledger book on their respective sides. For example, for depreciation on furniture, depreciation account will be posted on the credit side of furniture account and furniture account will be posted on the debit side of depreciation account.
Journal Entry
It is the basic record of a business transaction. It provides a complete and useful description of the transaction’s effect on the organisation. Entries can be classified into the following categories:
(i) Simple journal entry If a transaction involves only two accounts in which one account is debited and another account is credited, is called a simple journal entry.
(ii) Compound journal entry It is an entry which involves multiple accounts. A transaction that involves more than two accounts to be debited or credited is called a compound entry.
(iii) Contra entries The entries which involve cash account and bank account and in which, if cash account is debited then bank account is credited or vice-versa, are called contra entries. To record such entries in the cash book, we generally write (c) in the ledger folio column.
Narration
A brief description of a transaction given while journalizing in the journal book is called narration.
Meaning of c/f and b/f
C/f stands for carried forward and b/f stands for brought forward.
As the number of transactions is very large, these are recorded on a number of pages in the journal book. Hence, at the end of each page of the journal book, the amount columns are totaled and carried forward to the next page where such amounts are recorded as brought forward balances on the beginning of the page.
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