Journal : Books of Prime Entry, Functions & Advantages of Journal

General Journal:  This is also known as Journal Proper or General Journal. It is used for making the original record of such transactions for which no special journal has been kept in the business. All transactions are first recorded in the journal as and when they occur; the record is chronological; otherwise it would be difficult to maintain the records in an orderly manner. Entries recorded in the a journal proper may be confined to the following transactions:

Journal.png

Content in this Article
hide

Books of Prime Entry

A journal is often referred to as Book of Prime Entry or the book of original entry. In this book transactions are recorded in their chronological order. The process of recording transaction in a journal is called as “Journalisation”. The entry made in this book is called a “journal entry”

Functions of Journal

  • (i) Analytical Function: Each transaction is analysed into the debit aspect and the credit aspect. This helps to find out how each transaction will financially affect the business.
  • (ii) Recording Function: Accountancy is a business language which helps to record the transactions based on the principles. Each such recording entry is supported by a narration, which explain, the transaction in simple language. Narration means to narrate – i.e. to explain. It starts with the word – Being …
  • (iii) Historical Function: It contains a chronological record of the transactions for future references.

(i) Opening Entries: Opening entries are passed at the beginning of the financial year to open the accounts by recording the assets, liabilities and capital appearing in the balance sheet of the previous year. It is written as follows:

Also Read:  VITEEE Counselling 2024 – Check VIT B.Tech Admission & Schedule

Assets Account   Dr.
   To Liabilities Account
   To Capital Account

(ii) Closing Entries: Closing entries are passed at the end of the accounting year for closing of accounts relating to expenses and revenues. These accounts are closed by transferring their balances to the Trading and Profit & Loss Account.

(iii) Adjustment Entries: At the end of the accounting year, adjustments entries are passed for outstanding/prepaid expenses, accrued income/income received in advance etc. Entries for all these adjustments are passed in the journal proper.

(iv) Transfer Entries: Transfer entries are passed in the general journal for transferring an item entered in one account to another account.

(v) Rectification Entries: Rectification entries are passed for rectifying errors which might have committed in the books of account.

(vi) Purchase of Fixed Assets: When fixed assets are purchased on credit, the entries are passed in the general journal.

(vii) Sale of Worn-out or Obsolete Assets: When obsolete assets are sold on credit, these are originally recorded in the general journal.

Advantages of Journal

In journal, transactions recorded on the basis of double entry system, fetch following advantages:

  • (i) Chronological Record: It records transactions as and when it happens. So it is possible to get a detailed day-to-day information.
  • (ii) Minimizing the possibility of errors: The nature of transaction and its effect on the financial position of the business is determined by recording and analyzing into debit and credit aspect.
  • (iii) Narration: It means explanation of the recorded transactions.
  • (iv) Helps to finalize the accounts: Journal is the basis of ledger posting and the ultimate Trial Balance.
  • As transactions are recorded on chronological order, one can get complete information about the business transactions on time basis.
  • Entries recorded in the journal are supported by a note termed as narration, which is a precise explanation of the transaction for the proper understanding of the entry. One can know the correctness of the entry through these narrations.
  • Journal forms the basis for posting the entries in the ledger. This eases the accountant in their work and reduces the chances of error.
Also Read:  Tom Hiddleston Net Worth 2024: Car, Salary, Assets, Earnings

Explanation of Journal

  • (i) Date Column: This column contains the date of the transaction.
  • (ii) Particulars: This column contains which account is to be debited and which account is to be credited. It is also supported by an explanation called narration.
  • (iii) Voucher Number: This Column contains the number written on the voucher of the respective transaction.
  • (iv) Ledger Folio (L.F.): This column contains the folio (i.e. page no.) of the ledger, where the transaction is posted.
  • (v) Dr. Amount and Cr. Amount: This column shows the financial value of each transaction. The amount is recorded in both the columns, since for every debit there is a corresponding and equal credit.

All the columns are filled in at the time of entering the transaction except for the column of ledger folio. This is filled at the time of posting of the transaction to “ledger”.

Recommended

  • Accrued Liabilities
  • Limitations of Accounting
  • Depreciation Guidance Note
  • Capital Structure
  • Book Keeping
  • Interest on Capital
  • Accounting Estimates
  • Double Entry System
  • Book Keeping
Also Read:  Knowing the Sources of the Income Tax – A Detailed Analysis

1 photos of the "Journal : Books of Prime Entry, Functions & Advantages of Journal"

Journal.png