Note on Journal

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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 its customers. 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 when they 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 first entry 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 subsequent entry."-L.C. Cropper

"The journal or daily record as originally used was a book of prime entry in which transactions was 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:

  1. To make permanent and systematic record of all the financial transactions.
  2. To help to prepare the principal book or ledger.
  3. To provide legal evidence of all the financial transactions performed by the business.
  4. To present complete information of each transaction.
  5. To show debit and credit aspects or accounts involved in each transaction.

Importance of Journal

  1. It provides the legal evidence of all the transactions performed by an organization.
  2. It provides the foundation for further accounting processes of the transactions.
  3. It provides the basis for preparing ledger accounts.
  4. It helps to minimize errors in recording and posting due to the involvement of both aspects of the transactions.
  5. 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 the financial transactions in the journal in a systematic way is called journalizing. The record of the transactions made in the journal is called journal entry. Journalizing is the act of passing journal entry. The following steps are taken into consideration while journalizing the transactions:

  1. Identifying the two aspects of each transaction.
  2. Identifying the appropriate accounts of these two aspects of each transaction.
  3. Recording each transaction in the journal book involving debit and credit accounts in chronological order.
  4. Identifying the debit and credit accounts of each transaction by applying the rules of debit and credit.

Rules of Journalizing:

According to the double entry system, every transaction is recorded in the journal involving its two aspects. One aspect of the transaction is debited in one account and the other aspect is credited in another account involving the equal amount. The crucial task while journalizing the transaction 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.

1. Personal Account: It is the account of a person or organization or debtor or creditor. It is the record of an individual or organization. Under it, the person receiving the benefit is debited and the person giving benefit is credited. The rule of journalizing in personal account is as follows:

  • Debit the receiver
  • Credit the giver

2. Real Account: It is an impersonal account. It is the account of a real thing or property. It is the record of assets of the business. Under, 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 journalizing in real account is as follow:

  • Debit what comes in
  • Credit what goes out

3. 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 and the record of financial benefit against the service rendered. The rule of journalizing in nominal account is as follows:

  • Debit all expenses and losses
  • Credit all incomes and profits

  • Journal is the first book to keep a systematic record of all the business transactions.
  • The record of the transactions made in the journal is called journal entry. 
  • Journalizing is the act is passing journal entry. 
  • The system record of a transaction in the journal book is called journal entry, the process of passing journal entry is called journalism.
.

Very Short Questions

The following are the objectives of preparing journal:

  1. To make permanent and systematic record of all the financial transactions.
  2. To help to prepare the principal book or ledger.
  3. To provide legal evidence of all the financial transactions performed by the business.
  4. To present complete information of each transactions.
  5. To show debit and credit aspects or accounts involved in each transactions.

The following are the main importances of journal:

  1. It provides the legal evidence of all the transactions performed by an organization.
  2. It provides the foundation for further accounting processes of the transactions.
  3. It provides the basis for preparing ledger accounts.
  4. It helps to minimize errors in recording and posting due to the involvement of both aspects of the transactions.
  5. It fulfills the further accounting processes of the transactions.

The system record of a transaction in the journal book is called journal entry, the process of passing journal entry is calledjournalising.The rules are also known as rules of debit and credit.

1. Personal Account:It is the account of a person or organization or debtor or creditor. It is the record of an individual or organization. Under it, the person receiving benefit is debited and the person giving benefit is credited. The rule of journalizing in personal account is as follows:

  • Debit the receiver
  • Credit the giver

2. Real Account:It is an impersonal account. It is the account of a real thing or property. It is the record of assets of the business. Under, it asset coming into business through its purchase is debited and the asset going out of the business through its sale is credited. The rule of journalizing in real account is as follow:

  • Debit what comes in
  • Credit what goes out

3. 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 and the record of financial benefit against the service rendered. The rule of journalizing in nominal account is as follows:

  • Debit all expenses and losses
  • Credit all incomes and profits

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  • Which of the following statements is incorrect in the double entry accounting system maintained manually?

    A journal entry should be substantiated by appropriate voucher and authorized at proper level.


    A journal entry is needed only in the absence of other suitable book of prime entry for the transaction.


    A journal entry should always end with a narration explaining the need for it.


    A journal entry should always consist of a single debit entry matched by a corresponding credit entry.


  • If a company uses special journal, cash sales should be recorded in which journal?

    Cash disbursements journal


    Sales journal


    Cash receipts journal


    General journal


  • If a company uses special journals, credit sales should be recorded in which journal?

    Cash receipts journal


    Purchase journal


    Sales journal


    Cash disbursements journal


  • If a company uses special journal, purchase of supplies on the account should be recorded in which journal?

    Cash receipts journal


    Cash disbursements journal


    Sales journal


    Purchases journal


  • The rule of journalizing in personal account is ______.

    debit all expenses and losses, credit all incomes and profits


    debit what comes in, credit what goes out


    debit the giver, credit the receiver


    debit the receiver, credit the giver


  • ______ is the record of assets of the business.

    Personal account


    Imperial account


    Real account


    Nominal account


  • ______ does not exist in the business in real form. It appears only in the books.

    Personal account


    All the answers are correct


    Real account


    Nominal account


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