CH-9 BOOKS OF ORIGINAL ENTRY – JOURNAL

CHAPTER 09: BOOKS OF ORIGINAL ENTRY-JOURNAL

Introduction to Books of Original Entry: These are the primary books where business transactions are first recorded in chronological order as and when they occur. They are also known as Subsidiary Books or Prime Entry Books. Transactions are recorded in these books directly from source documents.

The subsidiary book may be enumerated as under:-

  JOURNAL: Journal is a book of original entry in which the transactions are recorded first of all, as and when they take place. 

According to Prof. Carter, “ The journal as originally used, is a book of prime entry in which transactions are copied in order of date from a memorandum or waste book. The entries as they are copied are classified into debits and credits, so as to facilitate their being correctly posted, afterwards in the ledger.”

               Features OR Characteristics of a Journal

1. Journal is a book of original entry in which the transactions are recorded first of all, as and when they take place.
2. A journal is only a book of primary(original) entry. All transactions, before being classified into specific accounts, are initially entered here.

• Each day’s transactions are recorded in the journal on the same day.

1. Transactions are recorded in a chronological order, in date-wise order.
2. Maintains the identity of each transaction and provides a complete picture the same in one entry.
3. Records both debit and credit aspects of a transaction according to double entry system of book-keeping.

• Each entry in the journal is followed by a brief explanation of the transactions which is called ‘NARRATION’.
• A single journal entry is capable of recording more than one transaction involving more than two accounts. Such an entry is called compound entry.

        Functions of a Journal

1. To keep a chronological record of all transactions.
2. To analyse each transaction into debit and credit aspects by using double entry system of book-keeping.

• To provide a basis for posting into ledger.

1. To maintain the identity of each transaction by keeping a complete record of each transaction at one place on a permanent basis.

      Advantages of a Journal

1. Possibility of omission of a transaction in the books of accounts is minimised.
2. Easy to locate a particular transaction when required.

• By analysing each transaction into debit and credit aspects, the journal facilitates the posting into ledger.

1. Facilitates cross checking of ledger accounts in case a trial balance does not agree.
2. The identity of each transaction is maintained on a permanent basis.
3. Once the transaction is recorded in journal, posting in the ledger can be made as and when convenient.

      Limitations of Journal

1. For a business with a large number of daily transactions recording every single transaction individually in the journal becomes an extremely lengthy, tedious, and time-consuming process. This makes the journal too bulky and difficult to manage and analyze.
2. Many transactions are repetitive in nature and if all transactions are recorded in journal it will involve debiting and crediting the same accounts time and again. It will involve repetitive posting labour also.

In order to ascertain cash balance everyday, cash transactions are usually recorded in a separate book called ‘Cash book’. Thus transactions need not be recorded in journal.

• Journal does not provide the required information on prompt basis.

    Format of Journal 

Date	Particulars	L.F	Amt. Dr.	Amt. Cr.
(1)	(2)	(3)	(4)	(5)

 

   Steps in Journalising

• Before recording a journal entry, it is essential to analyse a transaction in order to determine the two accounts which are affected. Then, on the basis rule of Journalising, it must be decided as to which account is to be debited and which account to be credited.
• It is not necessary to use the word ‘Account’ or A/c after the personal accounts.
• After every journal entry, a line should be drawn in particulars columns, so that each entry is separated from the preceding one.
• At the end of each page, both Dr. and Cr. Columns are totalled in front of each other. The total must be equal because the amount debited in each entry equals he amount credited.

Rules of Journalism

1) Personal Accounts: – According to the rule of ‘ Debit The receiver’, the personal account of the person to whom we give some money or goods are debited. For example, if we give ₹ 10,000 to Vikash, the entry will be:-

 

Vikash                                         Dr. 10,000

To Cash A/c                                                               10,000

(Cash paid to Vikash)

According to the rule of ‘Credit the giver’, the personal account of the person from whom we receive some money or goods is credited.

For example, if we received ₹ 20,000 from Anurag, the entry will be: –

 

Cash A/c                                            Dr. 20,000

To Anurag                                                      20,000

(Cash received from Anurag)

2) Real Accounts:- According to the rule of ‘Debit what comes in and credit what goes out’, the account of the cash or other property which is received by the business firm is debited in the same way, the account of the cash or other property which goes out of the business is credited.

For example, if a furniture is bought for ₹ 15,000

 

Furniture A/c                                                Dr. 15,000

To Cash A/c                                                           15,000

(Furniture purchased for cash)

 

3) Nominal Account: – According to the rule of ‘Debit all Expenses’, the accounts of all expenses and losses are debited.

For example, if ₹ 20,000 are paid for salary, the entry will be:-

 

Salary A/c                                                      Dr. 20,000

To Cash A/c                                                                  20,000

(Salary paid)

 

According to the rule of ‘ Debit all incomes’, the account of all incomes and profit are credited.

For example, if ₹ 5,000 are received for commission, the entry will be:-

 

Cash A/c                                                        Dr. 5,000

To Commission A/c                                                   5,000

(Commission received)

 

Meaning Of Goods: Goods are those things, which are purchased for resale. In other words, goods are the commodities in which the business deals.

Goods Account is classified into five accounts for the purpose of passing the journal entries:-

• Purchase A/c: – When goods are purchased, instead of debiting Goods A/c ‘Purchase A/c’ is debited. Purchase A/c is a nominal account and while passing a journal entry ‘Purchased A/c’ should always be debited because the rule of ‘ Debit all Expenses and Losses’
• Sale A/c: – When goods are sold, instead of Crediting Goods A/c ‘Sales A/c’ is credit. Sale A/c is nominal account and while passing a journal entry ‘Sales A/c’ should always be credited because of the rule of ‘Credit all income and Gains’.
• Purchases Return A/c: – This account is also named as ‘Return outward’. It is a nominal account and should always be credited because purchase i.e. expenses are reduced.
• Sale Return A/c: – The account is also named as ‘Returned Inward’. It is a nominal account and should always be debited because income i.e. Sale are reduced.
• Stock A/c 

Example:

Journalise the following transactions in the books of M/s. Global Traders for April 2025:

1. April 1: Started business with Machinery ₹ 1,50,000 and Stock ₹ 50,000.
2. April 5: Purchased office furniture from Modern Furnishers on credit for ₹ 30,000.
3. April 10: Sold old computer (asset) to Tech Solutions on credit for ₹ 12,000.
4. April 15: Proprietor withdrew goods for personal use, costing ₹ 5,000.
5. April 20: Goods worth ₹ 2,000 were destroyed by fire. Insurance company admitted claim for ₹ 1,500.
6. April 25: Ram, a debtor, whose account was previously written off as bad, paid ₹ 1,000 in full settlement.
7. April 30: Provided depreciation on Machinery @ 10% p.a. for the month. (Original cost of Machinery: ₹ 1,50,000).
8. April 30: Paid outstanding salaries from March, ₹ 8,000. (Note: This assumes the March entry for outstanding salaries was made through the journal).

Books of M/s. Global Traders

Journal Entries

Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2025 Apr 1	Machinery Account		1,50,000
	Stock Account		50,000
	To Capital Account			2,00,000
	(Being business started with machinery and stock)
Apr 5	Office Furniture Account		30,000
	To Modern Furnishers Account			30,000
	(Being office furniture purchased on credit)
Apr 10	Tech Solutions Account		12,000
	To Old Computer Account			12,000
	(Being old computer sold on credit)
Apr 15	Drawings Account		5,000
	To Purchases Account			5,000
	(Being goods withdrawn by proprietor for personal use)
Apr 20	Loss by Fire Account		500
	Insurance Claim Receivable Account		1,500
	To Purchases Account			2,000
	(Being goods destroyed by fire and claim admitted by insurance company)
Apr 25	Cash Account		1,000
	To Bad Debts Recovered Account			1,000
	(Being cash received from Ram, whose account was previously written off)
Apr 30	Depreciation Account		1,250
	To Machinery Account			1,250
	(Being depreciation charged on machinery for the month)
	Calculation: ₹ 1,50,000 x 10% x (1/12)
Apr 30	Outstanding Salaries Account		8,000
	To Cash Account			8,000
	(Being outstanding salaries for March paid)