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Business Jargons

A Business Encyclopedia

Journal

Definition: In the accounting world, Journal refers to a book wherein transactions are logged for the very first time, and that is why it is also called as “Book of Original Entry“.

In this book, all the regular business transactions are entered sequentially, i.e. as an when they arise. After that, the transactions are posted to the Ledger, in the concerned accounts. When the transactions are recorded in the journal, they are called as Journal Entries.

As per Double Entry System of Book Keeping, every transaction affects two sides, i.e. debit and credit. So, the transactions are entered in the book as per the Golden Rules of Accounting, to know which account is to be debited and which one is to be credited.

Types of Journal

There are two types of the journal:

types of journal

  • General Journal: General Journal is one in which a small business entity records all the day to day business transactions
  • Special Journal: In the case of big business houses, the journal is classified into different books called as special journals. Transactions are recorded in these special journals on the basis of their nature. These books are also known as subsidiary books. It includes cash book, purchase day book, sales day book, bills receivable book, bills payable book, return inward book, return outward book and journal proper.

    The journal proper is used for entering infrequent transactions such as opening entries, closing entries and rectification entries.

Journalizing Process

The process of recording transactions in the journal is called Journalizing. The transactions are recorded in the journal in the manner of their occurrence along with a suitable explanation, called ‘Narration‘ which supports the entry.

The steps involved in the process of Journalizing are as under:

  1. Identification of Accounts: The first and foremost step in any given transaction is to identify the accounts which are being affected with it.
  2. Recognition of Account type: Once the accounts are identified, the type of account is ascertained, i.e. whether it is a personal account, real account or nominal account.
  3. Applying the golden rules of accounting: The rules of debit and credit, i.e. the golden rules of accounting are to be applied to the accounts which are affected by the transactions.

The debit and credit sides of the journal must be equal. There are some transactions in which you will find there are more than one debit for a single credit, more than one credit for a single debit or multiple debits and credits for an entry. Such entries are called as a compound journal entry. Nevertheless, the aggregate amount of debit and credit in an entry must tally.

Format of Journal

journal format

  • Date: In this column, we mention the date of the transaction along with the month in which the transaction took place. The year is indicated at the top only once and not repeated with every date.
  • Particulars: This column indicates the accounts which are affected, i.e. debited or credited, by the transaction. In the very first line, we write the account which is debited and then in the extreme right of the same line and column we write Dr. which indicates Debit.

    In the next line, after leaving some space, we write the account which is credited starting with the preposition ‘to’. A small narration for the respective transaction is given in the third line which explains the entry in the brackets, and it starts with the word ‘being’.

  • Voucher Number: In this column, we enter the number written on the voucher of the concerned transaction.
  • L.F. or Ledger Folio: As we know that transactions entered in the journal are then taken to the Ledger, in their respective accounts. In this column, the page number concerning the entry in the ledger is mentioned.
  • Dr. Amount: The amount to be debited for a particular entry is written in the same line, where the debited account is indicated.
  • Cr. Amount: The amount to be credited for a particular entry is written in the same line, where the concerned credited account is written.

All the columns are to be filled at the time of recording the transaction in the journal, except the ledger folio column which is filled when the transaction is posted to the ledger.

The journal entries may extend to multiple pages, and so both the two columns are totalled at the end of each page, with the word Total c/f, i.e. carried forward. Further, at the beginning of the next page, the amounts in debit and credit columns in the previous page is written with the words Total b/f, i.e. brought forward. Finally, on the last page of the entry, the Grand Total is written, and the columns are totalled.

Related terms:

  1. Ledger
  2. Trial Balance
  3. Petty Cash Book
  4. Golden Rules of Accounting
  5. Bank Reconciliation Statement

Reader Interactions

Comments

  1. Sameer Saifi says

    September 18, 2019 at 1:15 pm

    Please give me Notes of Basic Accounting

    Reply
  2. Yogesh singh says

    November 19, 2019 at 3:05 pm

    Nice article,

    Reply
  3. Anthony titilope says

    May 4, 2021 at 11:03 pm

    I found this so helpful… Thanks so much
    Nd how do we get the invoice number

    Reply
  4. Precious says

    May 11, 2021 at 3:00 am

    Good Job

    Reply
  5. AlmazAbebe says

    July 10, 2021 at 2:09 am

    This is good study thank you very much

    Reply
  6. Tony says

    February 14, 2022 at 11:43 pm

    Very nice and helpful. Thanks

    Reply
  7. IMAOBONG OKON says

    May 22, 2022 at 7:48 am

    This is very useful, thank you

    Reply
  8. Mercy Peter says

    September 20, 2022 at 6:58 pm

    Good job. I really appreciate

    Reply
  9. chanda sonawane says

    March 18, 2023 at 10:13 pm

    its very helpfull information for whom who dont know about account.

    Reply
  10. Adeyika, s. F says

    November 8, 2023 at 9:22 pm

    The information given is very detailed and explanatory enough for the beginners. Thank so much.

    Reply

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