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Learning Objectives:

  1. Define and explain journal.

  2. What are characteristics of journal? What are its advantages and how a journal is prepared?

Definition and Explanation:

The word "journal" has been derived from the French word "jour". Jour means day. So journal means daily. Transactions are recorded daily in journal and hence it has been named so. It is a book of original entry to record chronologically (i.e. in order of date) and in detail the various transactions of a trader. It is also known Day Book because it contains the account of every day's transactions.

Characteristics of Journal:

Journal has the following features:

  1. Journal is the first successful step of the double entry system. A transaction is recorded first of all in the journal. So the journal is called the book of original entry.

  2. A transaction is recorded on the same day it takes place. So, journal is called Day Book.

  3. Transactions are recorded chronologically, So, journal is called chronological book

  4. For each transaction the names of the two concerned accounts indicating  which is debited and which is credited, are clearly written in two consecutive lines. This makes ledger-posting easy. That is why journal is called "Assistant to Ledger" or "subsidiary book"

  5. Narration is written below each entry.

  6. The amount is written in the last two columns - debit amount in debit column and credit amount in credit column.

Advantages of Journal:

The following arte the advantages of journal:

  1. Each transaction is recorded as soon as it takes place. So there is no possibility of any transaction being omitted from the books of account.

  2. Since the transactions are kept recorded in journal, chronologically with narration, it can be easily ascertained when and why a transaction has taken place.

  3. For each and every transaction which of the two concerned accounts will be debited and which account credited, are clearly written in journal. So, there is no possibility of committing any mistake in writing the ledger.

  4. Since all the debits of transaction are recorded in journal, it is not necessary to repeat them in ledger. As a result ledger is kept tidy and brief.

  5. Journal shows the complete story of a transaction in one entry.

  6. Any mistake in ledger can be easily detected with the help of journal.

Objective of an Entry:

While recording transactions in journal the following two objects must be aimed at:

  1. That each entry in the journal should be so clear that at any future time we may, without the aid of memory, perceive the exact nature of the transactions.

  2. That each transaction should be so classified that we may easily obtain the aggregate effect of such transactions at the end of a certain period.

Narration of an Entry:

It is the remark or explanation put below each entry in the journal. The journal is a book of original entry and all possible details have to recorded in connection with each and every transaction entered there. The details are laid out in the form of a remark at the end of each journal entry, which is called narration.

Form of Journal:

Dr. Amount Cr. Amount

Column (1)  is meant for writing the date of the transaction.
Column (2) is used for recording the names of the two accounts affected by transactions.
Column (3) is meant for noting the number of the page of the ledger on on which the particular account appears in that book.
Column (4) shows the amount to be debited to the account named.
Column (5) shows the amount to be credited to the account stated.

Rules of Journalising:

The act of recording transactions in journal is called journalising. The rules may be summarised as follows:

  1. Use two separate lines for writing the names of the two accounts concerned in each transaction.
  2. write the name of the debtor or account to be debited in the first line and the name of the creditor or the account to be credited in the next line
  3. Write the name of the account to be debited close to the line starting the particulars column and that of the account to be credited at a short distance from this line.
  4. Use "Dr" after each debit item and "To" before each credit. The term "Cr." after a credit item is unnecessary, as if one account is debtor, the other must be creditor.
  5. To separate one entry from another a line is drawn below every entry to cover particulars column only. The line does not extend to amount column.

Example 1:

On first January, 1991 A started business with capital of $20,000 and his transactions of the month were as follows:
Jan.2 Purchased building for cash 8,000
Jan.8 Purchased goods from C 1,000
Jan.15 Sold goods for cash 500
Jan.20 Goods returned to C 100
Jan.22 Sold goods to R 400
Jan.25 R returned goods 25
Jan.31 Salaries paid for the month 200
Jan.31 Rent paid for the month 150


Journal of A
Date Particulars L.F Debit Credit
Jan. 1 Cash Account          ...Dr.   20,000  
     To Capital Account     20,000
  (Capital introduced)      
Jan 2. Building Account       ...Dr.   8,000  
   To Cash Account 8,000
(Building purchased for cash)

Jan. 8 Purchases Account   ...Dr.   1,000  
     To Sales Account     1,000
(Goods purchased on credit form C)

Jan. 15 Cash Account          ...Dr.   500  
     To Sales Account     500
  (Goods sold for cash)      
Jan. 20 C                           ...Dr.   100  
     To purchases Returns Account     100
  (Goods returned to C)      
Jan. 22 R                           ...Dr.   400  
     To Sales Account     400
  (Goods sold on credit)      

Jan. 25 Sales returns Account ..Dr. 25
   To R 25
(Goods returned by him)

Jan. 31 Salaries Account        ...Dr. 200
   To Cash Account 200
(Salaries paid)
Jan. 31 Rent Account            ...Dr. 150
   To Cash Account 150
(Rent paid in cash)


30,375 30,375

Capital Account:

The proprietor's account in the business books is called "capital account". Whenever the proprietor invests money in the business, instead of giving credit to his name, capital account should be credited.

Drawings Account:

Any cash or goods taken away by the proprietor for his personal use are called his drawings and are debited to "Drawings Account". Drawings account like the capital account is personal account of the proprietor.

Casts and Carry Forwards:

In bookkeeping casting means totaling. The first page of the journal will be cast by drawing a line across the money column. The total of this page will be carried forward to the to the top of second page. The total of the second page will be carried forward to the third page and so on until the last page gives the final total.

When carrying forward the total of the one page to another, the words "carried forward" or "carried over" should be written at the bottom of the first page and words "brought forward" the top of the next page. The abbreviations c/f or c/o and b/f can also be used.

Compound Journal Entries:

When two or more transactions of the same nature take place on the same date, a compound journal entry may be made instead of making separate entries for each transaction.

Trade Discount:

No entry is passed for trade discount. The purchases or sales should be recorded at net price i.e., after deducting the trade discount from the list price.

Goods Given Away:

Sometimes goods are (a) given away as charity (b) taken by the proprietor for his private use (c) distributed free as samples. Such goods are not sales. Therefore they are not credited to sales account but are credited to purchases account because they reduce the amount of goods purchased.

Example 2:

On first April 1991 a merchant started business with a capital of $15,000 and his transactions of the month were as follows:
April 2 Purchased machinery for $7,000.
April 3 Bought furniture from S $300.
April 7 Purchased goods for cash $2,500
April 8 Sold goods to R & Sons $1,500
April 10 Bought goods from B, $1,000 and from C $2,000
April 12 Received cash from R & Sons $1,450, allowed him discount of $50.
April 15 Paid B cash $975, discount received $25.
April 16 Returned goods to C $500
April 17 Sold goods to Din Mohammad $800
April 20 Goods returned by Din Mohammad $200
April 21 Purchased from K goods of the list price of $600 subject to a 10 percent trade discount.
April 22 Paid C cash $1,500
April 25 Gave away a charity cash $50 and goods worth $30.
April 27 Distributed goods worth $200 as free samples and goods taken away by the proprietor for personal use $100
April 28 Amount withdrawn by the proprietor for private use $200
April 31 Salaries paid for the month $500

Record these transactions in the journal.


Date Particulars L.F Debit Credit
April 1 Cash Account          ...Dr.   15,000  
     To Capital Account     15,000
  (Capital introduced)      
April 2 Machinery Account   7,000  
   To Cash Account 7,000
(Machinery purchased)

April 3 Furniture Account   2,500  
     To Cash Account     2,500
(Goods purchased for cash C)

April 7 Purchases Account   3,000  
     To Cash Account     3,000
  (Goods purchased for cash)      
April 8 R & Sons   1,500  
     To Sales Account     1,500
  (Goods sold on credit)      
April 10 Purchases Account   3,000  
   To B 1,000
   To C 2,00
  (Goods purchased on credit)      

April 12 Cash Account 1,450
Discount 50
   To R & Sons 1,500
(Cash received and discount allowed)

April 15 B 1,000
   To Cash Account 975
   To Discount account 25
(Salaries paid)
April 16 C 500
   To Purchases Return Account 500
(Goods returned to C)

April 17 Din Mohammad   800  
     To Sales Account     800
  (Goods sold on credit)      
April 20 Sales Returns Account   200  
     To Din Mohammad     200
  (Goods returned by him)      
April 21 Purchases Account   540  
     To K     540
  (Goods purchased on credit)      
April 22 C   1,500  
     To Cash Account     1,500
  (Cash paid to C)      
April 25 Charity Account   80  
     To Cash Account     50
     To Purchases Account     30
  (Cash and goods given in charity)      
April 27 Free samples Account   200  
  Drawings Account   100  
     To Purchases Account     300
  (Goods distributed free and taken by the proprietor for private use)      
April 28 Drawings Account   200  
     To Cash     200
  (Cash drawn by the proprietor)      
April 31  Salaries Account   500  
     To Cash Account     500
  (Salaries paid in cash)      


(a) In actual practice even the word "Dr." is not written after the name of the account to be debited, because it is also implied.

(b) When writing the name of a personal account, it is not considered necessary to add the word "account" after the name of the person.


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