Journal is also termed as the subsidiary book. Recording the transactions in the journal is termed as journalizing the entries. All transactions are recorded in the journal as and when they occur i.e. in chronological order else it may be cumbersome to keep track of records in the proper manner.
FORMAT OF JOURNAL
|DATE||PARTICULARS||L.F.||Dr ($)||Cr ($)|
The column nos. has been given for only reference purpose here. They do not form part of Journal:
Now we shall understand what the purpose of each column is:
- In the first column, the date of the transaction is entered. On the top year of transaction is written then month and then date in the following manner
- In the second column, the names of the accounts involved are written; first the account which is be debited, with the word “Dr” written towards the end of the column. In the next line, after leaving a little space, the name of the account to be credited is written preceded by the word “To” (the modern practice shows an inclination towards omitting “Dr.” and “To”). Then in the next line, the explanation for the entry together with necessary details is given this is termed as narration. Having written the Narration, a line is drawn in the Particulars column, which indicates the completion of recording the specific journal entry.
- In the third column the number of the page in the ledger on which the account is written up
Is entered. This column is filled up at the time of posting and not at the time of making the journal entry.
- In the fourth column, the amounts to be debited to the various accounts concerned are entered.
- In the fifth column, the amount to be credited to various accounts is entered.
- Journal entries can be the single entry (i.e. one debit and one credit) or compound entry (i.e. one debit and two or more credits or two or more debits and one credit or two or more debits and credits). In such cases, it is vital to check that the total of both debits and credits are equal.
- If journal entries are recorded in several pages then both the amount column of each page should be totalled and the balance should be written at the ending of that page and also that the same total should be carried forward at the beginning of the next page.
Here is a typical example of Journal entry.
Suppose we want to pass Journal entry for cash received of $5000 from Tony, the entry will be:
January 1st Cash A/c Dr. 5000
To Tony 5000
(Being cash received from Tony)
Now we will pass few journal entries and analysis them with respect to rules of Double entry system and Journal.
Analyse transactions of M/s Nash & Co. for the month of march, 2000 on the basis of double entry system
Transactions for the month of march, 2000 were as follows:
- Nash introduced cash $ 40,000.
- Cash deposited in the City Bank $ 20,000.
- Cash loan of $ 5,000 taken from Mr. Y.
- Salaries paid for the month of march, 2000, $ 3,000 and $ 1,000 is still payable for the month of march, 2000.
- Furniture purchased $ 5,000.
Pass journal entries and analyze them.
|Transaction||Analysis||Accounts affected||Rule||Entry (Amt in $)|
|Introduction of cash||Cash received by business
Given by owner
|Cash – real
Capital – personal
|Debit what comes in
Credit what goes out
|Cash A/c Dr 5000
To Capital A/c 5000
|Cash deposit in the bank||Bank receives cash
Cash goes out
|Debit the receiver
Credit what goes
|Bank A/c Dr. 20000
To cash A/c 20000
|Loan from Y
|Business gets cash
Y pays cash
Credit the giver
|Cash A/c Dr. 5000
To Y’s Loan 5000
$ 3,000 and
|Cost of services
used $ 4,000
Cash goes out $ 3,000
Still payable or
|Debit all expenses
Credit the giver
|Salary A/c Dr. 4,000
To Cash A/c 3,000
outstanding A/c 1000
Cash is paid
Credit what goes out
|Furniture A/c Dr 5000
To Cash A/c 5000