Journal: 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’. Journal is the book of primary entry in which every transaction is recorded before being posted into the ledger.
It is that book of account in which transactions are recorded in a chronological (day to day) order. In modern times, besides the main journal, specialized journals are maintained to record different types of transactions. The process of recording transactions in a journal is termed as journalising. A journal is generally kept in a columnar from. check out more details Advantages of Journal, Functions of JournalJournal
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.
Advantages of Journal
- (i) Chronological Record: It records transactions as and when it happens. So it is possible to get a detailed dayto-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.
Classification of Accounts
(i) Personal Accounts: Personal accounts relate to persons, trade receivables or trade payables. Example would be the account of Ram & Co., a credit customer or the account of Jhaveri & Co., a supplier of goods. The capital account is the account of the proprietor and, therefore, it is also personal but adjustment on account of profits and losses are made in it. This account is further classified into three categories:- (a) Natural personal accounts: It relates to transactions of human beings like Ram, Rita, etc.
- (b) Artificial (legal) personal accounts: For business purposes, business entities are treated to have a separate entities. They are recognised as persons in the eye of law for dealing with other persons. For example: Government, Companies (private or limited), Clubs, Co-operative societies etc.
- (c) Representative personal accounts: These are not in the name of any person or organisation but are represented as personal accounts. For example: outstanding liability account or prepaid account, capital account, drawings account.
- (a) Real Accounts: Accounts which relate to assets of the f rm but not debt. For example, accounts regarding land, building, investment, f xed deposits etc., are real accounts. Cash in hand and Cash at the bank accounts are also real.
- (b) Nominal Accounts: Accounts which relate to expenses, losses, gains, revenue, etc. like salary account, interest paid account, commission received account. The net result of all the nominal accounts is ref ected as prof t or loss which is transferred to the capital account. Nominal accounts are, therefore, temporary.