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:
Books of Prime EntryA 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.
To Liabilities Account
To Capital Account
Advantages of Journal
- (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.
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.